BJisawarafei 


argoKSSoaeeieEsI 


Robert  E.  Gross 
Colleftion 

A  Memorial  to  the  Founder 
of  the 


Business  Administration  Library 

t/niveriifu  M^airMtmt'a 

Los  Angeles 


PRINCIPLES 


OF 


POLITICAL  ECONOMY 


BY 

WILLIAM  ROSCHER, 

PROFESSOR  OF  POLITICAL  ECONOJtT   AT  THE   UNIVERSITY  OP  LEIPZIG,   CORRESPONDING 

MEMBER  OP  THE   INSTITUTE   OP  FRANCE,   PRIVY  COUNSELOR  TO  HIS 

MAJESTY,   THE   KING   OF   SAXONY. 

FROM  THE  THIRTEENTH  (1877)  GERMAN  EDITION. 

WITH   ADDITIONAL  CHAPTERS   FURNISHED  BY  THE  AUTHOR,   FOR  THIS  FIRST 
ENGLISH  AND  AMERICAN   EDITION,   ON 

PAPER  MONEY,  INTERNATIONAL  TRADE,  AND  THE 
PROTECTIVE  SYSTEM; 

AND    A    PRELIMINARY 

ESSAY  ON  THE  HISTORICAL  METHOD  IN  POLITICAL  ECONOMY. 

(From  the  French) 

By  L.  WOLOWSKI, 


THE    WHOLE   TRANSLATED    BY 

JOHN  J.  LALOP,  A.  M. 


YOL.  I, 


CHICAGO: 

CALLAGHAN  AND  COMPANY. 

1878. 


Entered  according  to  Act  of  Congress,  in  the  year  eighteen  hundred  and  seventy-eight, 

By  CALLAGHAN  &  CO., 

In  the  oflace  of  the  Librarian  of  Congress,  at  Washington,  D.  C. 


DAVID  ATWOOD,  8TEEE0TTPEE  AND  PRINTER,  MADISOX,  WIS. 


Gross  Collection 
Bus.  Adm.  Lib. 


175 


WILLIAM    H.    GAYLORD,   Esq., 

COUNSELOR  AT  LAW, 
OF  CLEVELAND,  OHIO, 

TO  WHOSE  BF.OTHEP.lt  CARE  IT  IS  LARGELY  DUE  THAT  I    LIVFD  TO 
TRANSLATE  TUKM, 

THESE    VOLUMES 

ARE  AFFECTIONATELY  INSCRIBED. 


1621438 


TRANSLATOR'S  PREFACE. 


Our  literature  is  rich  enough  in  works  on  the  principles  of 
Political  Economy.  So  far  as  the  translator  is  informed, 
however,  it  possesses  none  in  which  the  science  is  treated  in 
accordance  with  the  historical  method.  We  may  therefore 
venture  to  express  the  hope  that  this  translation  will  fill  a 
place  hitherto  unoccupied  in  the  literatures  of  England  and 
America,  and  fill  it  all  the  more  efficiently  and  acceptably, 
as  Professor  Roscher  is  the  founder  and  still  the  leader  of 
the  historical  school  of  Political  Economy.  Were  this  the 
only  recommendation  of  our  undertaking,  it  would  not  be  a 
useless  one.  But  a  glance  at  Professor  Roscher's  book  will 
convince  even  the  most  hasty  reader  that  its  pages  fascinate 
by  their  interest  and  are  rich  in  treasures  of  erudition  which 
should  not  remain  inaccessible  to  the  English  student  from 
being  locked  up  in  a  foreign  tongue. 

The  present  translation  has  received,  throughout,  the  revis- 
ion of  the  author,  and  should  any  imperfections  remain  in  the 
rendering  of  his  thought  into  English,  the  blame  is  certainly 
not  his,  for  his  revision  has  been  most  minute. 

The  three  appendices  have  been  supplied  by  Professor 
Roscher  expressly  for  this  edition.  As  they  are  intended  to 
form  a  part  of  the  work  on  the  Political  Economy  of  Industry 
and  Commerce,  on  which  he  is  now  engaged,  he  authorizes 


vi  TRANSLATOR'S  PREFACE. 

their  publication  in  English,  only  by  the  publishers  of  this 
edition  of  his  principles;  and  only  for  the  purpose  of  being 
added  to  the  present  translation.  He  desires  especially  that 
their  appearance  in  their  present  shape  should  not  in  any  way 
interfere  with  any  of  his  rights  in  his  forthcoming  volume, 
and  that  they  should  not  be  translated  into  any  language  nor 
translated  back  into  German. 

The  essay  of  Mr.  Wolowski,  on  the  historical  method  in 
Political  Economy  constitutes  no  part  of  Professor  Roscher's 
book,  and  neither  he  nor  its  author,  but  only  the  translator,  is 
responsible  for  its  appearance  here.  In  it  the  reader  will  find 
a  short  sketch  of  the  life  of  Professor  Roscher,  brought 
down  to  the  date  at  which  the  essay  was  written.  The  trans- 
lator has  little  to  add  to  that  sketch,  all  the  information  he 
possesses  in  addition  to  what  it  contains  being  embraced  in 
the  following  lines  from  a  letter  received  by  him  from  the 
author  in  answer  to  a  request  that  he  would  supply  the  bio- 
graphical data  not  to  be  found  in  Wolowski's  essa}^:  "You 
might  perhaps  say  ....  that  I  have  repeatedly  declined  calls 
to  the  Universities  of  Munich,  Vienna  and  Berlin,  but  that 
I  have  never  regretted  remaining  in  Leipzig." 

The  acknowledgments  of  the  translator  are  due,  in  the 
first  place,  to  the  eminent  author  himself,  for  the  revision  of 
the  plate-proof  of  the  entire  work,  and  then  to  Professor 
William  F.  Allen,  of  the  University  of  Wisconsin,  for  his 
interest  in  the  progress  of  the  enterprise,  and  for  many  val- 
uable suggestions;  also  to  Professor  W.  G.  Sumner,  of 
Yale  College,  for  some  excellent  hints  as  to  the  best  transla- 
tion of  certain  words  in  the  Appendix  on  Paper  Money. 


AUTHOR'S  PREFACE.  yii 


AUTHOR'S  TREFACE. 

[1st  Edition.] 


My  System  der  Volkszvirthschaft  shall,  Deo  volenie,he.  completed 
in  four  parts.  The  second  shall  contain  the  national  economy 
of  agriculture  and  the  related  branches  of  natural  production ; 
the  third,  the  national  economy  of  industr}^  and  commerce; 
the  fourth,  of  the  economy  of  the  state  and  of  the  commune 
(Gcmcindchaiishalt),  While  the  entire  work  shall  constitute 
one  systematic  whole,  each  part  shall  have  its  own  appropri- 
ate title,  constitute  an  independent  treatise,  and  be  sold  sepa- 
rately. 

Of  the  peculiar  method  which  I  have  followed  in  this  work, 
and  which  will  produce  still  better  fruits  in  the  succeeding 
volumes,  I  have  given  a  sufficient  explanation  in  §§  26  if.,  and 
all  I  desire  now  is  to  say  a  few  words  on  the  relation  the  notes 
bear  to  the  text.  The  careful  reader  will  soon  be  convinced 
that  of  the  many  citations  in  this  work,  not  one  has  been  made 
from  a  vain  desire  of  the  display  of  erudition.  Part  of  them 
serves  as  the  necessary  proof  of  surprising  facts  adduced,  but 
which  are  little  known.  Another  part  of  them  is  intended  to 
incite  the  reader  to  the  study  of  certain  questions  nearly  re- 
lated to  those  treated  in  the  text,  but  which  are  still  different 
from  them.  The  object  of  the  greater  number  is  to  supply 
information  concerning  the  histor}^  of  economic  principles.  As 
far  as  the  sources  at  my  command  permitted,  I  have  endeav- 
ored to  point  out  the  first  germs,  the  chief  stages  of  develop- 
ment, the  contrasts,  and,  finally,  what  has  been  thus  far  at- 
tained in  economic  science.  This  sometimes  required  some 
little  victory  over  self,  inasmuch  as  I  was  conscious  of  having 


yiii  AUTHOR'S  PREFACE. 

independently  discovered  certain  facts,  when  I  afterwards 
found  that  some  old  and  long-forgotten  writer  had  made  sim- 
ilar observations.  Thus,  this  work  may  serve  both  as  a  hand- 
book and  as  a  history  of  the  literature  of  Political  Economy. 
Students  of  the  science  know  how  little  has  thus  far  been 
done  by  writers  in  this  direction.  And  hence  I  shall  be  very 
grateful  to  those  who  labor  in  the  same  field,  if  they  will,  either 
by  writing  to  me  personally,  or  through  the  medium  of  the 
press,  inform  me  when  I  have  erred  in  ascribing  a  truth,  or  a 
scientifically  important  error,  to  its  earliest  author. 

I  have  already  said  in  the  title  that  this  work  is  intended 
not  for  the  learned  only,  but  for  all  educated  men,  for  men  of 
a  serious  turn  of  mind,  who  desire  truth  and  science  for  their 
own  sake.  Like  that  ancient  historian,  whom  I  honor  above 
all  others  as  my  teacher,  I  desire  that  my  work  should  be 
useful  to  those,  oao:  ^oukjaovzo.c  tqju  ts  yevoixsvcov  to  aacpez 
axoTiBtv  xat  r<3v  jitXXovziov  ttots  av&a;  xazd  to  dud^pcoTzecou  tocoutoju 
xat  TrapartXr^auou  'iazad-ac.     ( Thucydides  I,  22.) 

University  of  Leipzig, 
End  of  May^  ^Sj^f. 


AUTHOR'S  PREFACE. 


IX 


FROM    THE 


AUTHOR'S  PREFACES. 

t2d  to  nth  Edition.]      . 


The  preface  to  the  second  edition  is  dated  October,  1856; 
that  to  the  third,  April,  1858;  that  to  the  fourth,  April,  1861; 
that  to  the  fifth,  November,  1863;  that  to  the  sixth,  Novem- 
ber, 1865;  that  to  the  seventh,  November,  1868;  that  to  the 
eighth,  August,  1869;  that  to  the  ninth,  March,  1871;  that  to 
the  tenth.  Ma}',  1873;  that  to  the  eleventh  (unaltered),  Decem- 
ber, 1873.  Each  successive  edition,  nearly,  has  been  an- 
nounced as  an  improved  and  enlarged  one;  and  the  tenth 
edition  contains  one  hundred  and  fifty-six  pages  more  than 
the  first,  although  in  places,  a  large  number  of  abbreviations 
had  been  made  from  previous  editions.  There  are  many 
things  in  some  of  the  previous  editions  which  criticism  induced 
me,  long  since,  to  change.  I  have  considered  it  my  duty  to 
the  public,  who  gave  my  work  so  warm  and  friendly  a  recep- 
tion, to  take  into  consideration,  in  each  successive  edition,  not 
only  my  own  new  investigations,  but  those  also  of  all  others 
with  which  I  became  acquainted,  and,  whenever  possible,  to 
correct  statistical  illustrations  from  the  latest  sources.  I  have 
especially,  in  each  following  edition,  enriched  a  number  of 
paragraphs  with  here  and  there  historical,  ethnographic  and 
statistical  features.  Plutarch  is  certainly  right,  spite  of  the 
fact  that  pedants  may  abuse  him  for  it,  when  he  says,  that 
trifling  acts,  a  word  and  even  a  jest,  are  often  more  important, 
as  characterizing  the  life  of  a  people  or  an  age,  than  great 
battles  which  cost  the  lives  of  tens  of  thousands  of  men. 

I  have  changed  the  titles  "  Ricardo's  Law  of  Rent,"  and 
"  The  Malthusian  Law  of  the  Increase  of  Population,"  which 


X  AUTHOR'S  PREFACE. 

I  formerly  used,  for  others.  But  I  would  not  be  misunder- 
stood here.  I  hold  it  to  be  a  duty  of  reverence  in  the 
learned  —  as  it  has  long  been  practiced  in  the  case  of  the  natu- 
ral sciences  —  in  the  sciences  of  the  human  mind  to  call  the 
natural  laws,  methods  etc.,  in  acquainting  us  with  which,  some 
one  particular  investigator  has  won  very  distinguished  merit, 
by  the  name  of  that  investigator.  In  the  case  of  the  law  of 
rent,  the  application  of  this  rule  would  as  unquestionably  en- 
title Ricardo  to  this  honor  as  as  it  would  Malthus  in  that  of 
the  increase  of  population,  spite  of  the  fact  that  Ricardo  may 
not  have  succeeded  in  finding  the  best  possible  form  of  the 
abstraction,  and  although  Malthus  even,  in  a  one-sided  reac- 
tion against  a  former  still  greater  one-sidedness,  was  not 
always  able  to  steer  clear  of  positive  and  negative  errors. 
Recent  science  has  endeavored,  and  successfully,  to  examine 
the  facts  which  contradict  the  Ricardoan  and  Malthusian  for- 
mulations of  the  laws  in  question,  and  to  extend  the  formu- 
las accordingly.  I  have  myself  contributed  hereto  to  the  ex- 
tent of  my  ability.  But,  in  the  interval,  it  is  not  hard  to  com- 
prehend that,  while  this  process  of  elucidation  is  going  on, 
most  scholars,  those  especially  possessed  more  of  a  dogmatic 
than  of  a  historical  turn  of  mind,  should  estimate  these  two 
leaders  more  in  accordance  with  their  few  defects  than  with 
the  great  merits  of  their  discoveries.  If,  therefore,  I  now 
drop  the  title  "  Malthusian  law,"  it  is  to  guard  hasty  readers 
from  the  illusion  that  §§  242  seq.  teach  what  the  great  crowd 
understand  by  Malthusianism ;  when  they  might,  perhaps, 
omit  that  portion  entirely.  For  my  own  part,  I  have  no  doubt 
that,  when  the  process  of  elucidation  above  referred  to  shall 
have  been  thoroughly  finished,  the  future  will  accord  both  to 
Ricardo  and  Malthus  their  full  meed  of  honor  as  political 
economists  and  discoverers  of  the  first  rank.^ 

1  The  author's  preface  to  the  twelfth  edition  is  confined  to  pointing  out  the 
improvements  etc.,  made  in  the  eleventh.  There  is  no  new  preface  to  the 
thirteenth  edition  of  the  original,  which  appeared  in  1S77. —  Translator. 


TABLE  OF  CONTENTS. 


PRELIMINARY  ESSAY. 
The  Historical  Method, pp.  1-48. 


PRINCIPLES  OF  POLITICAL  ECONOMY. 


INTRODUCTION. 

CHAPTER  I. 

FUNDAMENTAL,   IDEAS. 

§  I.  Goods  —  Wants. 

2.  Economic  Goods. 

3.  Three  Classes  of  Goods. 

4.  Economic  Value  —  Value  in  Use. 

5.  Value  in  Exchange  —  Free  Goods. 

6.  Alleged  Contradiction  between  Value  in  Use  and  Value  in 

Exchange. 

7.  Resources  or  Means. 

8.  Valuation  of  Resources. 

9.  Wealth. 

10.  Signs  of  National  Wealth. 

11.  Economy  (Husbandry). 

12.  Grades  of  Economy  in  Common. 

13.  Political  Economy  —  Idea  of  an  Organism. 

14.  Origin  of  a  Nation's  Economy. 

15.  Diseases  of  the  Social  Organism. 


Xii  TABLE  OF  CONTENTS. 

CHAPTER  11. 

POSITION   OF   POLITICAL    ECONOMY   IN    THE    CIRCLE   OF    RELATED 

SCIENCES. 

§  i6.     Political  or  National  Economy. 

17.  Sciences  relating  to  National  Life  —  The  Science  of  Public 

Economy  —  The  Science  of  Finance. 

18.  Statistics. 

19.  Private  Economy  —  Cameralistic  Science. 

20.  Private  Economy  (continued). 

21.  What  Political  Economy  treats  of. 

CHAPTER  IIL 

METHODS   OF   POLITICAL   ECONOMY. 

§  22.  Former  Methods. 

23.  The  Idealistic  Method. 

24.  The  Idealistic  Method  (continued). 

25.  The  Idealistic  Method  (continued). 

26.  The  Historical  Method  —  The  Anatomy  and  Physiology  of 

National  Economy. 

27.  Advantages  of  the  Historical  or  Physiological  Method. 

28.  Advantages* of  the  Historical  Method. 

29.  Practical  Character  of  the  Historical  Method. 

BOOK  I. 

PRODUCTION  OF  GOODS. 
§  30.     Meaning  of  Production. 

CHAPTER   L 

FACTORS   OF   PRODUCTION. 

§31.  Factors  of  Production  —  External  Nature. 

32.  The  Sea — Climate. 

33.  Gifts  of  Nature  with  Value  in  Excnange. 

34.  External  Nature  (continued). 

35.  Elements  of  Agricultural  Productiveness. 

36.  Further  Divisions  of  Nature's  Gifts. 

37.  Geographical  Character  of  a  Country. 

38.  Labor  —  Classes  of  Labor. 

39.  Taste  for  Labor  —  Piece-Wages. 

40.  Labor- Power  of  Individuals. 

41.  Esteem  in  which  Labor  is  held. 


TABLE  OF  CONTENTS.  xiU 

§42.  Capital  —  Classes  of  Goods  which  Constitute  it. 

43.  Productive  Capital. 

44.  Fixed  Capital  —  Circulating  Capital. 

45.  How  Capital  originates. 

CHAPTER  II. 

PRODUCTIVE    COOPERATION    OF   THE    FACTORS. 

§  46.  Pi'oductive  Cooperation  of  the  Three  Factors. 

47.  The  Three  Great  Periods  of  a  Nation's  Economy. 

48.  Critical  History  of  the  Idea  of  Productiveness. 

49.  The  Doctrine  of  the  Physiocrates. 

50.  The  Same  Subject  (continued). 

51.  The  Same  Subject  (continued). 

52.  Idea  of  Productiveness. 

53.  The  Same  Subject  (continued). 

54.  Importance  of  a  Due  Proportion  in  the  Different  Branches 

of  Productiveness. 

55.  The  Degree  of  Productiveness. 

56.  Development  of  the  Division  of  Labor. 

57.  Its  Extent  at  Different  Periods. 

58.  Advantages  of  the  Division  of  Labor. 

59.  Conditions  of  the  Division  of  Labor. 

60.  Influence  of  the  Extent  of  the  Market  on  the  Division  of 

Labor. 

61.  Meajis  of  Increasing  the  Division  of  Labor. 

62.  Dark  Side  of  the  Division  of  Labor. 

63.  Gain  and  Loss  of  the  Division  of  Labor. 

64.  The  Cooperation  of  Labor. 

65.  Principle  of  Stability,  or  of  the  Continuity  of  Work. 

66.  Advantages  of  Large  Enterprises. 

CHAPTER   IV. 

FREEDOM   AND   SLAVERY. 

§  67.  Origin  of  Slavery. 

68.  Origin  of  Slavery  (continued). 

69.  The  Want  of  Freedom. 

70.  Emancipation. 

71.  Disadvantages  of  Slavery. 

72.  Effect  of  an  Advance  in  Civilization  on  Slavery. 

73.  The  Same  Subject  (continued). 

74.  The  Same  Subject  (continued). 

75.  The  Same  Subject  (continued). 

76.  The  Domestic  Servant  System. 


XIV 


TABLE  OF  CONTENTS. 


CHAPTER  V. 

COMMUNITY   OF    GOODS   AND   PRIVATE    PROPERTY. 

§  77.  Capital  —  Importance  of  Private  Property. 

78.  Socialism  and  Communism. 

79.  Socialism  and  Communism  (continued). 

80.  Socialism  and  Communism  (continued). 
8x.  Community  of  Goods. 

82.  Organization  of  Labor. 

83.  Organization  of  Labor  (continued). 

84.  Organization  of  Labor  (continued). 

85.  Right  of  Inheritance. 

86.  Right  of  Inheritance  (continued). 

87.  Landed  Property. 

88.  Landed  Property  (continued). 


§89 
90 

91 
92 

93 
94 


CHAPTER    VL 

CREDIT. 

Credit  in  General. 
Effects  of  Credit. 
Debtor- Laws. 
History  of  Credit  Laws. 
Means  of  Promoting  Credit. 
Letters  of  Respite. 


BOOK  11. 

CIRCULATION  OF  GOODS. 
CHAPTER   I. 

CIRCULATION   IN   GENERAL. 

§  95.  Meaning  of  the  Circulation  of  Goods. 

96.  Rapidity  of  Circulation. 

97.  Freedom  of  Competition. 

98.  How  Goods  are  Paid  for. 

99.  Freedom  of  Competition  and  International  Trade. 


CHAPTER   IL 

PRICES. 

§  100.     Prices  in  General, 
loi.    Effects  of  the  Struggle  of  Opposing  Interests  on  Price. 


TABLE  OF  CONTENTS.  XV 

§  I02.  Demand. 

103.  Demand  —  Indispensable  Goods. 

104.  Influence  of  Purchaser's  Solvability  on  Prices. 

105.  Supply. 

106.  The  Cost  of  Production. 

107.  Equilibrium  of  Prices. 

loS.  Eftect  of  a  Rise  in  Price  much  above  Cost. 

109.  Effect  of  a  DecHne  in  Price  below  Cost. 

no.  Different  Costs  of  Production  of  the  same  Goods. 

111.  The  Same  Subject  (continued). 

112.  Exceptions. 

113.  Exceptions  (continued). 

114.  Prices  Fixed  by  Government. 

115.  Influence  of  Growing  Civilization  on  Prices. 


CHAPTER    III. 

MONEY   IN   GENERAL. 

§  1 16.  Instrument  of  Exchange  —  Measure  of  Value  —  Barter. 

117.  Effect  of  the  Introduction  of  Money. 

118.  Different  Kinds  of  Money. 

119.  Metals  as  Money. 

120.  Money  —  The  Precious  Metals. 

121.  Value  in  Use  and  Value  in  Exchange  of  Money. 

122.  Value  in  Exchange  of  Money. 

123.  Quantity  of  Money  a  Nation  Needs. 

124.  Same  Subject  (continued). 

125.  Uniformity  of  the  Value  in  Exchange  of  the  Precious  Metals. 

126.  The  Same  Subject  (continued.) 

CHAPTER    IV. 

HISTORY   OF   PRICES. 

§  127.  Measure  of  Prices. 

128.  Value  in  Exchange  estimated  in  Labor. 

129.  The  Precious  Metals  the  Best  Measure  of  Prices. 

130.  History  of  the  Prices  of  the  Chief  Wants  of  Life. 

131.  The  Same  Subject  (continued). 

132.  The  Same  Subject  (continued). 

133.  The  Same  Subject  (continued). 

134.  The  Same  Subject  (continued). 

135.  History  of  the  Value  of  the  Precious  Metals  — In  Antiquity 

and  the  Middle  Ages. 


XVi  TABLE  OF  CONTENTS. 

§  136.  Eifect  of  the  Discovery  of  American  Mines  etc.,  on  the  Value 
of  the  Precious  Metals. 

137.  Revolution  in  Prices  at  the  beginning  of  Modern  History. 

138.  Influence  of  the  Non-monetary  use  of  Gold  and  Silver. 

139.  Californian  and  Australian  Discoveries. 

140.  Influence  of  the  Revolution  in  Prices  on  National  Resources. 

141.  Effect  of  an  Enhancement  of  the  Price  of  the  Precious  Metals. 

142.  The  Price  of  Gold  as  compared  with  that  of  Silver. 

143.  The  Same  Subject  (continued;. 

APPENDIX  I. 

PAPER   MONEY. 

§  I.  Paper  Money  and  Money- Paper. 

2.  Advantages  and  Disadvantages  of  Paper  Money. 

3.  Kinds  of  Redemption. 

4.  Compulsary  Circulation. 

5.  Resumption  of  Specie  Payments. 

6.  Is  Paper  Money  a  Curse  or  a  Blessing .!* 


BOOK  III. 

DISTRIBUTION  OF  GOODS. 
CHAPTER  I. 

INCOME    IN   GENERAL. 

i  144.  Receipts  —  Income  —  Product. 

145.  Gross,  Free  and  Net  Income. 

146.  National  Income  —  Its  Statistical  Importance. 

147.  The  Same  Subject  (continued). 

148.  The  two  Phases  of  Income. 

CHAPTER  II. 

RENT   OF   LAND. 

1 149.  Theory  of  Rent. 

150.  Theory  of  Rent  (continued). 

151.  Theory  of  Rent  —  Land  Favorably  Situated. 

152.  Theory  of  Rent  (continued). 

153.  Theory  of  Rent  (continued). 

154.  Theory  of  Rent  (continued). 

155.  History  of  Rent. 


TABLE  OF  CONTENTS  xvil 

§  156.  Influence  of  Advancing  Civilization  on  Rent. 

157.  Influence  of  Improvements  in  the  Art  of  Agriculture  on  Rent. 

15S.  History  of  Rent  in  Periods  of  Decline. 

159.  Rent  and  the  General  Good. 

CHAPTER  III. 

WAGES. 

§  160.  Wages  of  Labor. 

161.  Minimum  of  Wages. 

162.  Cost  of  Production  of  Labor. 

163.  Power  of  the  Working  Classes  over  tlie  Rate  of  Wages. 

164.  Cost  of  Production  of  Labor. 

165.  The  Demand  for  Labor. 

166.  Price  of  Common  Labor. 

167.  Difterence  of  Wages  in  diflerent  Branches  of  Labor. 
16S.  The  Same  Subject  (continued). 

169.  Effect  of  the  Disagreeableness  of  certam  Classes  of  Labor  en 

Wages. 

170.  Influence  of  Custom  on  Wages. 

171.  History  of  the  Wages  of  Common  Labor  in  the  Lower  Stages 

of  Civilization. 

172.  History  of  the  Wages  of  Common  Labor  in  Flourishing  Times. 

173.  History  of  the  Wages  of  Common  Labor  in  Flourishing  Na- 

tions. 

174.  History  of  the  Wages  of  Common  Labor  in  Declining  Coun- 

tries and  Times. 

175.  Wages-Policy  —  Set  Price  of  Labor. 

176.  Wages-Policy  —  Strikes. 

177.  Strikes  and  The  State. 

178.  Guaranty  of  Minimum  of  Wages. 

CHAPTER  IV. 

INTEREST. 

§  179.  Rate  of  Interest  in  General. 

180.  Level  of  the  Rate  of  Interest. 

181.  Causes  of  DiiTerent  Rates  of  Interest. 

182.  Variations  of  the  Rate  of  Discount. 

183.  Effect  of  Increased  Demand  for  Loans. 

184.  History  of  the  Rate  of  Interest. 

185.  Influence  of  an  Advance  in  Civilization  on  the  Rate  of  Interest. 

186.  Causes  of  a  High  Rate  in  Thriving  Commercial  Nations. 

187.  Emigration  of  Capital. 
Vol.  I.— B 


Xviii  •  TABLE  OF  CONTENTS. 

§  iSS.  Effect  of  a  Low  Rate  en  Stationary  Nations. 

1S9.  Interest-Policy  —  Legitimateness  of  Interest. 

190.  Aversion  to  Interest. 

191.  Interest- Policy  —  The  Canon  Law  etc. 

192.  Interest  Policy  —  Government  Interference  —  Fixed  Rates. 

193.  Efforts  to  avoid  the  Evil  Effects  of  a  Fixed  Rate  of  Interest. 

194.  Repeal  of  the  Usury  Laws. 

CHAPTER  V. 

THE   undertaker's    PROFIT. 

§  195.     The  Reward  of  Enterprise. 
196.     Circumstances  on  which  the  Undertaker's  Profit  Depends. 
196  fa).  Having  the  "  Lead." 

CHAPTER  VL 

COKCLUDIXG    REMARKS   ON    THE   THREE   BRANCHES   OF   INCOME. 

§  197.     Influence  of  the  Branches  of  Income  on  the  Price  of  Com- 
modities. 

195.  Remedy  in  Case  One  Factor  of  Production  has  become  dearer. 

199.  Influence  of  Foreign  Trade. 

200.  Influence  of  the  Branches  of  Income  on  the  Price  of  Com- 

modities. 

201.  Harmony  of  the  Three   Branches  of   Income — Individual 

Differences  in  them. 

202.  Necessity  of  the  Feeling  of  a  Common  Interest. 

CHAPTER  VII. 

DISTRIBUTION   OF   THE   NATIONAL   INCOME. 

§  203.     Effect  of  an  Equal  Division  of  the  National  Income. 

204.  Moneyed  Aristocracies  and  Pauperism. 

205.  Healthy  Distribution  of  the  National  Income. 


BOOK  IV. 


CHAPTER   L 

CONSUMPTION   OF   GOODS   IN   GENERAL. 

§  206.  Nature  and  Kinds  of  Consumption. 

207.  The  Most  Useful  Kind  of  Consumption. 

20S.  Notional  Consumption. 

209.  Consumption,  the  V/ork  of  Nature. 


TABLE  OF  CONTENTS.  xix 

210.  Necessity  of  Considering  what  is  really  Consumed. 

211.  Production  Impossible  without  Consumption. 

212.  Unproductive  Consumption. 

213.  Equilibrium  between  Production  and  Consumption. 

214.  Causes  of  an  Increase  of  Production. 

215.  Necessity  of  the  Proper  Simultaneous  Development  of  Pro- 

duction and  Consumption. 

216.  Commercial  Crises  in  General  —  A  General  Glut. 

217.  The  Same  Subject  (continued). 
21S.     Prodigality  and  Frugality. 

219.  Eftect  of  Prodigality. 

220.  When  Saving  is  Injurious. 

221.  Limits  to  the  Saving  of  Capital. 

222.  Spendthrift  Nations. 

223.  The  Most  Deti'imental  Kind  of  Extravagance. 

CHAPTER  II. 


§  224.  Luxury  in  General. 

225.  History  of  Luxury  —  In  the  Middle  Ages. 

226.  Luxury  of  Barbarous  Times. 

227.  Influence  of  the  Church  and  the  City. 
22S.  Luxury  in  Flourishing  Times. 

229.  Character  of  the  Luxury  of  the  Second  Period. 

230.  Condition  Precedent  of  this  Luxury. 

231.  When  the  Effects  of  Luxury  are  Favorable. 

232.  Character  of  Luxury  in  Declining  Nations. 

233.  Luxury-Policy. 

234.  History  of  Sumptuary  Laws. 

235.  Difficulty  of  Enforcing  Sumptuary  Laws. 

236.  Expediency  of  Sumptuary  Laws. 

CHAPTER    III. 

INSURANCE    IN    GENERAL. 

8  237.     Insurance  in  General. 
237  (a).     Mutual  and  Speculative  Institutions 
237  (b).     Economic  Advantages  of  Insurance. 
237  (c).     Fire  Insurance. 
237  (d).     Requisites  of  a  Good  System  of  Fire  Insurance. 


XX 


TABLE  OF  CONTENTS. 


BOOK  V. 

POPULATION. 


1238, 

239 
240 

241 
242, 
243 


CHAPTER   I. 


THEORY    OF    POPULATIOISr. 


Increase  of  Population  in  General. 

Limits  to  the  Increase  of  Population. 

Influence  of  an  Increase  of  the  Means  of  Subsistence. 

Eft'ect  of  Wars  on  Population. 

Tendencies  counter  to  the  Increase  of  Population. 

Opponents  of  Malthus. 


CHAPTER    II. 


HISTORY   OF    POPULATION. 


§  244.  History  of  Population  in  Barbarous  Times. 

245.  Community  of  Wives — Polygamy. 

246.  History  of  Population  in  highly  Civilized  Times. 

247.  The  Same  Subject  (continued). 

248.  The  Same  Subject  (continued). 

249.  History  of  Population  in  Periods  of  Decline. 

2  qo.  Influence  of  the  Sacredness  of  Marriage  on  Population. 

251.  Polygamy  —  Exposure  of  Children. 

252.  Positive  Decrease  of  Population. 


CHAPTER    III. 


POPULATION-POLICY. 


253.  Population-Policy  —  Over-population. 

254.  The  Ideal  of  Population. 

255.  Means  of  Promoting  Population. 

256.  Immigration. 

257.  Influence  of  Hygienic  Police. 

258.  Means   of  Checking  Population  —  Placing   Impediments  in 

the  way  of  Marriage. 

259.  Emigration. 

260.  Colonizing  Emigration. 

261.  State  aid  to  Emigration. 

262.  Emigration  and  Pauperism. 
262  (a).     Temporary  Emigration. 


TABLE  OF  CONTENTS.  xx'l 

J  263.     Conclusion. 

264.  Conclusion  (continued). 

265.  Conclusion  (continued). 

APPENDIX    ir. 

INTERNATIONAL    TRADE. 

§  I.  The  TNIei-cantile  System. 

2.  Reaction  against  the  Mercantile  System. 

3.  Further  Correction  of  the  ISIercantile  System. 

4.  Partial  Truth  of  the  Mercantile  System. 

5.  Advantages  of  International  Trade. 

APPENDIX    III. 

THE    INDUSTRIAL    PROTECTIVE    SYSTEM, 

§  I.     Proximate   Economic   Effects   of    the   Industrial    Protective 
System. 

2.  Effect  of  Export  Duties  etc.  on  Raw  J»Iaterial — Export  Pre- 

miuins. 

3.  The  Free-Trade  School. 

4.  Further  Educational  Effects  of  the  Industrial  Protective  Sys- 

tem. 

5.  Free-Trade  as  a  Policy. 

6.  Why  the  Protective  System  -was  Adopted, 

7.  How  long  is  Protection  Justifiable.' 

S.     Industrial-Protective  Policy  in  Particular. 
9.     What  Industries  only  should  be  Favored. 


PRELIMINARY   ESSAY. 


THE  HISTORICAL  METHOD. 


PEELIMINAEY  ESSAY 


APPLICATION   OF  THE  HISTORICAL  METHOD 
TO  THE  STUDY  OF  POLITICAL  ECONOMY, 


BY  M.  WOLOWSKI, 

MEMBER   OF   THE    INSTITUTE   OF   FRANCE. 


'■'■  Nunquam  bene  j>ercij>iemus  usu  nccessarium  nisi  ct  noverimus  jus  illud  usu 
von  nccessarium.  Ncxiim  est  et  colligatum  alterum  alteri.  Nulli  sunt  servi 
nodis,  cur  qu-CEstioncs  dc  scrvis  vcxanius?  Digna  imperito  vox." — Cuj.,  vii,  in 
titul.    Dig.     De  Justitia  et  Jure.' 

'■'■Homo  sum,  JiU7nani  nihil  a  me  alienmn puto^ —  Terence? 

'■^  Ista  prcBpotens,  ac  gloriosa  fhilosopkia." —  Cicero,  De  Or.,  I,  43.^ 


I. 

It  is  no  foolish  desire  to  make  a  vain  display  of  citations,  that 
induces  us,  at  the  beginning  of  this  essay,  intended  to  point  out 
the  results  of  the  application  of  a  new  method  to  the  study  of 
Political  Economy,  to  invoke  the  authority  of  a  poet  and  moral- 
ist, of  a  jurisconsult  and  of  a  philosopher.  The  writer  finds  in 
the  words  just  quoted  the  loftiest  expression  of  the  thought 

1 II  -yYj.  shall  never  thoroughly  understand  the  reason  of  customary  law  un- 
less we  also  have  a  knowledge  of  that  which  is  not  custom,ary.  The  one  is 
connected  and  bound  to  the  other.  We  have  no  slaves;  why  vex  ourselves 
^vith  questions  about  slaves.''  —  Words  worthy  of  a  novice." 

2 "  I  am  a  man ;  I  think  nothing  foreign  to  me  that  pertains  to  man." 

3 "That  excellent  and  glorious  philosophy." 
Vol.  I.— I 


2  PRELI^SIINARY  ESSAY 

which  dictates  these  lines,  viz. :  that  the  impartial  researches 
of  history,  a  profound  feeling  of  man's  moral  and  material  wants, 
and  the  light  of  philosophy,  should  govern  in  the  teaching  of 
a  science,  the  object  of  which  is  to  show  us  how  those  things 
which  are  intended  to  satisfy  our  wants  are  produced  and  dis- 
tributed among  the  several  classes  or  individuals  of  a  nation ; 
how  they  are  exchanged  one  against  another,  and  how  they 
are  consumed. 

The  nineteenth  century  affords  us  something  more  than  the 
admirable  spectacle  of  the  rapid  and  fertile  development  of 
mechanical  power  and  natural  forces.  This  is  but  one  of  the 
aspects,  we  might  even  say  but  one  of  the  results,  of  the  gen- 
eral progress  of  the  human  mind.  The  renovation  of  moral 
and  intellectual  studies  has  served  as  a  starting  point  for  the 
application  to  facts  of  the  conquests  of  thought.  Science  has 
preceded  art. 

In  the  foremost  rank  of  the  studies  just  referred  to  is  -philos- 
ophy^ which  initiates  us  into  the  knowledge  of  human  nature, 
the  basis  of  right,  and  which  translates  its  legitimate  aspira- 
tions into  a  language  which  we  can  understand;  history,  that 
■prophetess  of  the  truth,  as  one  of  the  ancients  called  it,  which 
places  before  us  the  faithful  picture  of  times  past,  not  by 
simply  putting  together  a  skeleton  of  facts,  but  by  following 
the  living  progress  of  events  and  the  organic  development  of 
institutions.  Such,  at  least,  has  been  the  work  of  those  noble 
minds  who  have  consecrated  their  energies  to  the  resuscitation 
of  ages  past,  in  their  true  shape,  and  such  is  the  service  for 
w^hich  we  are  indebted  to  them  for  the  successful  accomplish- 
ment of  the  reformation  of  historical  studies,  which  they 
attempted  with  such  rare  devotion  and  such  marvelous  sa- 
gacity. 

This  renovation  of  history  has  exerted  the  most  fertile  in- 
fluence in  the  region  of  philosoph}^,  in  that  of  law,  and  we 
believe  that  it  will  prove  no  less  useful  in  that  of  Political  Econ- 
omy. It  has  served  to  put  us  on  our  guard  against  being 
easily  misled  by  a  priori  notions. 


ON  THE  HISTORICAL  METHOD.  3 

By  exliri:)iting  to  us  the  results  of  the  life  and  of  the  experi- 
ence of  centuries,  by  teaching  us  by  what  steps  the  human 
mind  has  risen  to  its  present  eminence,  and  what  the  education 
given  it  in  the  past  has  been,  it  has  enabled  us  to  ascend  from 
phenomena  to  the  principles  which  preside  over  them ;  from 
facts  to  the  kiw ;  and  it  has  substituted  for  arbitrary  assump- 
tions and  purely  ideal  systems,  the  slow  but  progressive  work 
of  the  genius  of  nations.  Not  that  it  turns  a  deaf  ear  to  the 
exalted  lessons  of  philosophy,  nor  that  it  denies  the  etonial  7'e- 
lations  residting  from  the  nature  of  things.  Far  from  it.  On 
the  contrary,  it  supplies  a  solid  basis  to  intellectual  investiga- 
tions, and,  so  to  speak,  an  answer  for  all  the  moral  sciences,  to 
this  saying  of  Roederer:  "Politics  is  a  field  which  has  been 
traversed  thus  far  only  in  a  balloon ;  it  is  time  to  put  foot  on 
solid  ground." 

Neither  does  history,  as  thus  understood,  confine  itself  to 
mere  description ;  it  also  assumes  the  office  of  judge.  While 
it  pulls  down  much  that  passion  and  inaccuracy  have  reared,  and 
thus  restores  respect  for  the  past,  it  does  not  turn  that  past  into 
a  fetish.  It  looks  it  boldly  in  the  face  and  questions  it,  instead 
of  prostrating  itself  before  it  and  worshipping  it  with  downcast 
eyes.  Thus,  by  plainly  showing  us  the  many  bonds  which  tie 
us  to  it,  it  escapes  at  once  both  the  rashness  of  impatience  and 
the  wearisomeness  of  routine. 

The  impartiality  it  inculcates  is  not  indifference ;  and  there 
is  no  danger  that  the  justice  it  metes  out  to  past  ages  shall  de- 
generate into  a  vain  scepticism  or  a  convenient  optimism. 

The  study  of  history,  thus  understood,  has  another  advantage ; 
it  accustoms  us  to  those  patient  and  disinterested  investigations, 
to  those  lengthy  labors,  the  positive  result  of  which  at  first 
escapes  us  for  a  time,  only  to  burst  on  our  eyes,  with  so  much 
more  brilliancy,  when  rigorous  research  has  succeeded  in  dis- 
covering it.  It  frees  us  from  the  deadly  constraint  of  immedi- 
ate utility. 

There  is  nothinef  more  fatal  to  science  than  the  feverish  im- 
patience  for  results  which  obtains  only  too  much  in  our  own 


4  PRELIMINARY  ESSAY 

days,  and  which  induces  people  to  run  after  him  who  is  in  the 
greatest  hurry,  and  which  leads  to  hasty  conclusions. 

"Research  undertaken  from  a  disinterested  love  of  science," 
says  the  learned  Hugo,  one  of  the  masters  of  the  historical  school 
of  law  in  Germany,^  "that  research  which  at  first  promises  no 
other  advantage  but  truth  and  the  culture  of  the  mind,  is  pre- 
cisely that  which  brings  us  the  richest  rewards.  Would  we 
not  be  behind,  in  all  the  sciences,  if  we  had  clung  only  to  those 
principles,  the  utility  of  which  in  practice  was  already  known? 
Do  we  not,  to-day,  from  many  a  discovery,  reap  advantages  of 
which  its  author  never  dreamed?  " 

Doubtless  this  tendency,  unless  restrained  by  other  demands, 
is  not  exempt  from  danger.  We  may  be  carried  away  by  the 
attraction  peculiar  to  these  noble  studies,  withdraw  into  anti- 
quity and  fall  into  a  species  of  historical  mysticism  which  ends 
in  the  affirmation,  that  whatever  has  been  is  true,  absolutely, 
and  which,  instead  of  confining  itself  to  the  explanation  of 
transitory  phenomena,  invests  them  with  all  the  dignity  of  prin- 
ciples. We  shall  endeavor  to  avoid  the  peril  pointed  out  by 
Mallebranche.  "Learned  men  study  rather  to  acquire  a 
chimerical  greatness  in  the  imagination  of  other  men,  than  to 
acquire  greater  breadth  and  strength  of  mind  themselves. 
They  make  their  heads  a  kind  of  store-room,  into  which  they 
gather,  without  order  or  discrimination,  everything  which  has 
a  look  of  erudition, —  I  mean  to  say  everything  which  may 
seem  rare  or  extraordinary  and  excite  the  wonder  of  other 
people.  They  glory  in  getting  together,  in  this  archaeological 
museum,  antiques  with  nothing  that  is  rich  or  solid  about  them, 
and  the  price  of  which  depends  on  nothing  but  fancy,  chance 
or  passion." 

A  display  of  eruditon  may  obscure  the  truth,  and  bury  it  un- 
der its  weight,  instead  of  bringing  it  out  into  rehef  By  con- 
centrating the  mind  on  the  material  vestiges  of  the  past,  it 
may  withdraw  it  from  the  intellectual  movement  of  the  pres- 
ent, and  give  us  a  race  of  scholars,  of  great  merit,  doubtless, 

^  Introduction  to  the  Civilistisches  Magazin. 


ON  THE  HISTORICAL  METHOD.  5 

but  who  move  about  like  strangers  among  their  contempo- 
raries. 

Without  a  sense  for  the  practical,  and  without  ideas  of  an 
elevated  nature,  a  person  may,  indeed,  be  a  man  of  erudition  — 
he  cannot  be  a  historian.  As  the  proverb  says,  the  forest  can- 
not be  seen,  for  the  trees.  That  this  noble  study  may  bear  its 
best  and  most  useful  fruit ;  that  is,  that  it  should  preserve  us 
against  ambitious  foi'niiilas  and  destructive  chimeras,  we 
must  pursue  another  way. 

"  The  world,"  says  Montaigne,  "  is  incapable  of  curing  it- 
self It  is  so  impatient  of  what  burthens  it,  that  it  thinks  only 
of  how  it  shall  rid  itself  of  it,  without  inquiring  at  what  price. 
A  thousand  examples  show  us  that  it  cures  itself  ordinarily  at 
its  own  cost.  The  getting  rid  of  the  present  evil  is  not  cure, 
unless  there  be  a  greneral  amendment  of  condition.  Good  does 
not  immediately  succeed  evil.  One  evil,  and  a  worse,  may 
follow  another,  like  Ccesar's  assassins,  who  brought  the 
republic  to  such  a  pass,  that  they  had  reason  to  repent  the 
meddling  with  it."  Such,  too  frequently,  is  the  lot  of  those 
who,  abandoning  themselves  to  their  imagination,  and  with- 
out consulting  the  past,  mix  together  promises  of  liberty  and 
the  despotism  of  Utopias  which  they  would  impose  on  nations 
under  pretext  of  enfranchising  them.  Despising  the  work  of 
the  ages,  the}-  think  they  can  build  upon  a  soil  shaken  by  des- 
truction and  crumbled,  until  it  may  be  likened  to  moving  sand. 

Contempt  for  the  past  is  associated  with  a  passion  for 
reform.  Men  think  of  destroying  that  which  should  only 
be  transformed.  They  condemn  everything  that  has  been, 
unconditionally,  and  launch  out  towards  a  new  future.  The 
suffering  which  has  been  gone  through  irritates  and  troubles 
the  mind.  The  work  of  pulling  down  is  so  easy,  it  is  sup- 
posed that  the  work  of  building  up  is  equally  so.  Hence  sys- 
tems rise,  as  if  the  world  were  to  begin  anew.  The  pride  of 
liberty  and  of  human  action  becomes  the  principle  of  science; 
and,  like  all  new  principles,  it  pretends  to  exclusive  and  abso- 
lute dominion.      Rationalism    governs;    abstract   philosophy 


6  PRELIMINARY  ESSAY 

ignores  the  traditions  and  the  requirements  of  the  life  of  nations ; 
and  finds  now  in  it,  as  in  geometry,  nothing  but  piinciples  and 
deductions.  The  memory  of  recent  oppression  causes  us 
to  act  as  Tarquin  did,  and  to  level  down  the  higher  classes  in- 
stead of  elevating  the  inferior.  Liberty  and  equality  then  gov- 
ern by  their  negative  side,  instead  of  exercising  the  positive  and 
beneficent  influence  they  should  have,  to  develop  all  forces  to 
their  utmost,  to  ennoble  the  mind,  to  give  more  elasticity  to 
the  soul  and  greater  vigor  to  thought,  to  give  birth  to  those 
varied  forms  and  to  that  moral  energ}'-,  which  should  bring  us 
nearer  to  final  equality  in  the  bosom  of  God.^ 

We  forget  that  no  one  is  hornyree,  and  that  every  one 
ought  to  endeavor  to  become  so, 

Feindlich  ist  des  Mannes  Streben 

Mit  zermalmender  Gewalt  • 

Geht  der  Wilde  durch  des  Leben 

Ohne  Rast  und  Aufenthalt,  — Scliiller. 

and  make  himself  worthy  of  liberty,  by  the  exercise  of  manly 
virtue !  Because  the  form  has  been  changed,  we  believe  that 
we  have  changed  human  nature. 

It  is  easy  to  understand,  why,  where  these  ideas  prevail,  the 
study  of  the  past  should  be  neglected  and  despised.  Efforts 
are  made  to  avoid  it.  Why,  it  is  asked,  revive  memories  of 
oppression  and  misery?  The  old  world  is  wrecked.  It  is 
annihilated.  Peace  to  its  ashes!  Or  else,  after  it  has  been 
destroyed,  it  is  sought  for  again;  and,  under  pretext  of  eradi- 
cating the  evils  existing  in  it,  an  attack  is  made  on  the  eternal 
basis  on  which  human  society  rests,  on  the  laws  not  made  by 
man,  and  which  it  is  not  given  to  man  to  change.  The  world 
becomes  one  vast  laboratory,  in  which  the  rashest  experiments 
are  multiplied  in  number,  in  which  mankind  is  but  clay  in  the 
hands  of  the  potter  which  every  pretended  "thinker"  may 
mould  at  will,  by  giving  him  the  false  appearances  of  inde- 
pendence and  of  an  emancipated  being. 

'  Dunoycr,  De  la  Liberte  du  Travail. 


ON  TILE  HISTORICAL  METHOD.  7 

And,  indeed,  if  the  will  of  man  be  all-powerful,  if  states  are 
to  be  distinguished  from  one  another  only  by  their  boundaries, 
if  everything  may  be  changed  like  the  scenery  in  a  play  by  a 
flourish  of  the  magic  wand  of  a  system,  if  man  may  arbitrarily 
make  the  right,  if  nations  can  be  put  through  evolutions  like  a 
regiment  of  troops;  what  a  field  would  the  world  present  for 
attempts  at  the  realization  of  the  wildest  dreams,  and  what  a 
temptation  would  be  offered  to  take  possession,  by  main  force, 
of  the  government  of  human  affairs,  to  destroy  the  rights  of 
property  and  the  rights  of  capital,  to  gratify  ardent  longings 
without  trouble,  and  provide  the  much  coveted  means  of  en- 
joyment. The  Titans  have  tried  to  scale  the  heavens,  and 
have  fallen  into  the  most  degrading  materialism.  Purely 
speculative  dogmatism  sinks  into  materialism. 

All  is  changed,  both  men  and  things.  Yet  we  hear  the 
same  old  style  of  declamation.  There  are  those  who  wish  to 
plough  up  the  soil  which  the  harrow  of  the  revolution  went 
over  yesterday;  and  they  believe  they  are  marching  in  the 
way  of  progress.  They  do  not  see  that  they  have  mistaken 
their  age,  and  that  the  bold  attempts  of  the  past  have  now 
come  to  possess  a  directly  opposite  meaning.  Without  stop- 
ping to  inquire  to  wiiat  side  the  new  world  inclines,  they  re- 
peat the  same  words,  and  swear  in  verba  maglstri,  and  go  the 
road  of  destruction,  believing  themselves  to  be  creating  the 
world  anew! 

Nothing  is  more  natural  than  that  these  excesses  should 
produce  other  excesses,  in  a  contrary  direction.  Moved  by 
hatred  or  fear  of  revolutionary  absolutism,  nations  seek  an 
asylum  in  governmental  absolutism,  or  they  retrograde  to- 
wards the  middle  ages,  and  consider  the  mutual  bond  of  pro- 
tection and  dependence  of  that  period  as  the  ideal  and  the 
realization  of  true  liberty.  History  is  no  longer  the  organic 
development  of  social  life,  and  man,  like  a  soldier  that 
thoughtlessly  and  capriciously  has  gone  beyond  his  place  of 
supplies,  is  obliged  to  retrace  his  steps.  The  reaction  is 
clearly  defined.     The  past  is  opposed  to  the  present,  not  as  a 


8  PRELIMINARY  ESSAY 

lesson  to  be  turned  to  advantage,  but  as  a  model  which  must 
be  hastily  accepted ;  and  men  become  revolutionary  in  a  back- 
ward direction. 

However,  history,  rigorously  studied,  knows  neither  these 
complaisances  nor  these  weaknesses.  It  does  not  descend  to 
the  apotheosis  of  a  past  which  cannot  return  again.  The  real 
historical  spirit  consists  in  rightly  discerning  what  belongs  to 
each  epoch.  Its  object  is,  by  no  means,  to  call  back  the  dead 
to  life,  but  to  explain  why  and  how  they  lived.  In  harmony 
with  a  healthy  philosophy,  it  assigns  a  limit  to  the  vagaries  of 
arbitrary  will,  beyond  which  the  latter  cannot  go.  It  unceas- 
ingly calls  us  back,  from  the  heights  of  abstraction,  to  positive 
facts  and  things. 

In  the  creation  of  systems,  only  one  thing  was  wont  to  be 
forgotten,  men,  who  were  treated,  in  them,  like  so  many 
ciphers ;  for  intellectual  despotism  has  this  in  common  with  all 
despotic  authority.  History  teaches  us  that  we  can  reach 
nothing  great  or  lasting,  but  by  addressing  ourselves  to  the 
soul.  If  the  soul  decays,  there  can  be  no  longer  great  thoughts 
or  great  actions.  Society  lives  by  the  spirit  which  inhabits  it. 
It  may,  for  an  instant,  submit  to  the  empire  of  force,  but,  in  the 
long  run,  it  hearkens  only  to  the  voice  of  justice.  It  was  thus 
that  the  greatest  revolution  which  history  records,  that  of 
Christianity,  was  accomplished.  It  addressed  itself  only  to 
the  soul ;  but  by  changing  the  hearts  of  men,  it  transformed 
society  entirely. 

The  violent  struggle  between  an  imperious  dogmatism  and 
an  unintelligent  and  mistaken  attempt  at  a  retrogressive  move- 
ment is  resolved  into  a  higher  view,  which  permits  the  union 
of  conservatism  and  progress.  ^  Violent  attempts  and  rash  en- 
deavors made,  threatened  to  bring  contempt  on  the  noblest 
teachings  of  philosophy,  and  to  make  them  repulsive  to  man ; 
and,  on  the  other  hand,  a  blind  respect  for  the  institutions  con- 
secrated by  history  threatened  to  stifle  all  examination  and  all 
freedom  of  judgment. 

But  a  healthier  doctrine  has  permitted  us  to  understand,  that 


ON  THE  HISTORICAL  METHOD.  9 

we  are  continuing  the  work  of  preceding  generations ;  that  we 
are  developing  the  germs  which  they  successively  sowed; 
that  we  are  perfecting  that  which  they  had  only  sketched,  and 
that  we  are  letting  drop  that  which  has  no  support  in  the 
social  condition  of  man.  Every  thing  is  connected;  each 
thing  is  linked  to  every  other;  nothing  is  repeated.  The 
hopes  of  sudden  and  total  renovation,  based  on  absolute  for- 
mulas, vanish  before  the  touch  of  this  solid  study.  This  shows 
us  how  firm  and  unshaken  are  those  reforms  which  have  be- 
gun by  taking  hold  of  the  minds  of  men,  the  precise  spirit  of 
which  had  penetrated  into  the  souls  of  whole  nations  before 
they  had  manifested  themselves  in  facts. 

Law  and  Economy  constitute  a  part  of  the  life  of  nations  in 
the  same  way  that  language  and  customs  do.  The  power  of 
history  in  no  way  contradicts  the  supremacy  of  reason. 

II. 

These  two  tendencies,  the  rationalistic  and  the  historical,  are 
everywhere  found  face  to  face.  They  carry  on  an  eternal 
warfare,  which  is  renewed  in  every  age,  under  new  names 
and  new  forms.  Accomplished  facts  and  renovating  thought 
divide  the  world  between  them.  They  at  one  time  moderate 
its  speed,  and  at  others,  spur  it  on  its  way.  But  these  two 
forces,  instead  of  compromising  the  destinies  of  humanity  by 
their  opposing  action,  maintain  and  balance  them,  as  the  con- 
trary impulses  given  by  the  hand  of  the  Great  Architect  has 
peopled  the  universe  with  worlds  which  gravitate  in  space. 

Victor  Cousin,  a  very  competent  authority  on  the  subject, 
has  said  that  the  history  of  philosophy  is  the  torch  of  philoso- 
phy itself  The  remarkable  works  which  have  enriched  it  in 
this  direction  are  well  known.  History,  on  its  side,  is  en- 
lightened by  philosophy.  Thus,  it  teaches  us  not  to  despise 
facts,  but  at  the  same  time  not  to  be  slaves  to  precedent.  It 
does  equal  justice  to  the  incredulous  and  to  the  fanatic,  to  too 
supple  practitioners  and  to  intractable  theorizers. 


10  PRELIMINARY  ESSxVY 

We  may  doubtless  say  with  Henri  Klimrath,  who,  in  con- 
nection with  a  few  others,  had  undertaken  the  work  of  the 
restoration  of  historical  study  in  its  application  to  French  law, 
that  there  is  an  absolute,  true,  beautiful,  good  and  just,  the 
7'atio  recta  suinmi  Jovis^  the  supreme  reason  founded  in  the 
nature  of  things.^  The  eternal  truths  taught  by  philosophy 
constitute  the  higher  law,  a  law  which  dates  not  from  the  day 
on  which  it  was  reduced  to  writing,  but  from  the  day  of  its 
birth;  and  it  was  born  with  the  divine  intelligence  itself  '■'■^d 
non  tmn  denique  incifit  lex  esse,  cum  serif  ta  est,  sea  turn  cum 
oj^ta  est.  Orta  autem  simul  est  cum  metite  divinaP^  And 
Troplong  rightly  adds :  "  There  are  rules  anterior  to  all  posi- 
tive laws.  I  cannot  grant  that  the  action  of  conscience  and 
the  idea  of  right  are  the  work  of  the  legislatoi-.  It  is  not  law 
that  made  the  family,  property,  hberty,  equality,  the  idea  of 
good  and  evil.  It  may,  indeed,  give  organization  to  all  these 
things,  but  in  doing  so,  it  is  only  working  on  the  foundation 
which  nature  has  laid,  and  it  is  perfect  in  proportion  as  it 
comes  nearer  to  the  eternal,  immutable  laws  which  the  Creator 
has  engraved  on  our  hearts.  What  changes  is  not  the  eternal 
law,  the  revelation  of  which  comes  to  man  incessantly  and  by 
a  necessary  action,  but  the  form  in  which  humanity  clothes  it, 
the  institutions  which  man  builds  on  its  immutable  foundation."^ 

We  therefore  believe  in  the  law  of  nature,  and  regret  that  our 
opinion  is  not  shared  by  Mr.  Roscher,  at  least  that  he  does 
not  explicitly  enough  express  his  faith  in  it,  nor  apply  it  broadly 
enough  in  the  beautiful  work  which  we  are  happ}''  to  ren- 
der accessible  to  the  French  public.^     We  believe  in  it  in  its 


'  Cicero^  De  Leg.,  i. 

*  Discours  Preliminaire  du  Code  Civil. 

3  Cicero,  De  Leg.,  II,  4.  "  Legem  neque  hominum  ingeniis  excogitatam, 
nee  scitum  aliquod  esse  populorum,  sed  ZEternum  quiddam  quod  universuni 
mundum  regeret,  imperandi,  prohibendique  sapientia."     Ibid. 

4 Revue  de  Legisl.  et  de  Jurispr.  (1S41,  XIII,  p.  39.)  Montesquieu  says: 
"The  relations  of  justice  and  equity  are  anterior  to  all  positive  laws." 

5  Mr.  Wolowski  translated  the  second  edition  of  Roscher's  Principles  into 


OK  THE  HISTORICAL  METHOD.  H 

philosophical  sense,  aiid  not  simply  in  the  juridical  sense  at- 
tached to  it  by  Ulpian.  "Let  us  not,"  observes  Portalis, 
"  confound  the  physical  order  of  nature,  common  to  all  ani- 
mated beings,  with  the  natural  law  which  is  peculiar  to  man. 
We  call  natural  Iazt\  the  principles  which  govern  man  consid- 
ered as  a  moral  being,  that  is,  as  an  intelligent  and  free  being, 
intended  to  live  in  the  society  of  other  beings,  intelligent  and 
free  like  himself"^  Ulpian's  famous  tripartite  division,  of  nat- 
ural law,  the  law  of  nations,  and  the  civil  law,  is  proof,  from 
the  meaning  he  attaches  to  them,  either  of  a  misunderstand- 
ing or  of  the  imperfect  idea  which  the  Stoics  had  conceived 
of  the  essence  of  natural  law.  In  vain  Cujas  exhausted  all 
the  resources  of  his  noble  intellect  to  explain  it.^ 

French,  and  prefixed  the  present  essay  thereto  as  a  preface.  Since  Wol- 
owski's  translation  appeared,  the  original  work  has  gone  through  eleven  edi- 
tions, been  largely  increased  in  size,  and  enriched  -svith  new  notes,  the  re- 
sult of  nearly  twenty  additional  years  of  research  and  thought.  The  thir- 
teenth German  edition,  from  which  the  present  translation  is  made,  is  larger 
than  the  fii-st  by  one  hundred  and  seventy  pages.  —  Translator's  }iote. 

'  And  he  adds :  "  Animals  which  yield  only  to  an  impulse  or  blir^d  instinct, 
come  together  only  fortuitiously  or  periodically  and  in  a  manner  destitute 
of  all  morality.  But  in  the  case  of  men,  reason  is  mixed  up  more  or  less 
with  every  act  of  their  lives.  Sentiment  is  found  side  by  side  with  desire, 
and  right  succeeds  instinct.  I  discover  a  real  contract  in  the  union  of  the 
two  sexes." 

It  would  be  impossible  to  present  a  more  coniplete  or  eloquent  refutation 
of  the  definition  of  the  Roman  jurisconsults  which  debases  marriage  to  the 
level  of  the  promiscuous  coming  together  of  animals,  and  which  limits  the 
natural  law  to  the  law  common  to  man  and  beast.  "Jus  naturale  est  quod 
natura  omnia  animalia  docuit;  nam  jus  istud  non  humani  generis  proprium, 
sed  omnium  animalium  qua;  in  terra,  qua;  in  mare  nascuntur,  avium  quoquc 
commune  est.  Hinc  descendit  maris  atque  feminoe  conjunctio,  quam  nos 
matrimonium  appellamus,  hinc  liberorum  procreatio,  hinc  educatio;  videmus 
etenim  caetera  quoque  animalia,  feras  etiam,  istius  juris  peritia  censeri."  D.  L. 
I,  De  Just,  et  Jure. 

^  Comment,  in  tit.  Dig.,  De  Just,  et  Jure,  VII,  nth  Naples  edition.  The  in- 
genious argument  of  the  great  jurisconsult  falls  to  the  ground  under  the  beauti- 
ful words  of  Cicero :  "  Ut  justitia,  ita  jus  sine  ratione  non  consistit ;  soli  ratione 
utentes  jure  ac  lege  vivunt."  De  Natura  Dcorum,  II,  62.  Virtus  ratione 
constat,  brutic  ratione  non  utuntur,  cujus  sunt  expertia,  ergo  jure  non  vivunt, 
et  ut  rationis,  sic  jures  sunt  expertia."      Besides,  Cujas  himself  recognizes 


12  PRELIMINARY  ESSAY 

It  is  necessary  to  draw  a  distinction  between  physical  law 
and  the  law  {draii)  of  intelligent  beings.  Doubtless  the  ex- 
istence of  men  as  well  as  that  of  animals  is  limited  by  time. 
They  both  live  and  die ;  but  the  soul  escapes  the  necessities 
of  material  nature. 

The  moment  there  is  question  of  rights  intelligence  governs, 
reason  comes  into  play,  and  the  science  of  right  and  wrong  is 
appealed  to  as  a  guide.  Hence  the  natural  law  of  the  human 
species  is  not  the  physical  law  which  all  creatures  obey. 

It  was  necessary  for  us  to  insist  upon  these  principles.  It 
was  necessary  for  us  to  show  that  there  is  a  law  independent 
of  positive  and  local  law,  a  law  which  is  not  the  expression  of 
an  arbitrary  will,  but  an  emanation  from  the  nature  of  things.^ 

Hence  come  the  features  in  common  which  we  meet  with 
everywhere,  and  the  variable  forms  which  develop  law  in  har- 
mony with  the  special  conditions  of  each  civil  society. 

We  must  descend  into  the  very  depths  of  human  nature  to 
discover  these  eternal  and  permanent  laws;  and  if  the  mere 
eftbrt  of  the  mind  should  not  reach  them  directly,  they  might 
be  discovered  in  the  phenomena  of  the  life  of  nations.  His- 
tory affords  us  the  counter-proof  and  confirmation  of  the  phil- 
osophical doctrine. 

The  development  of  society  does  not  afford  a  mathemati- 
cal expression  of  these  higher  truths.  It  gives  them  a  form 
which  is  unceasingly  modified  in  the  written  law.  The  person 
who  discovers  in  them  nothing  but  an  absolute  rule,  looks 
upon  the  changes  as  evidences  of  caprice  or  error.  He  alone 
understands  the  revolutions  of  things  who  knows  their  cause 
and  the  necessity  which  produces  them. 

how  faulty  and  incomplete  was  the  definition  he  was  defending :  "  At  ne  jus 
quidem  naturale,  de  quo  agimus,  est  commune  omnium  animalium  quatenus 
rationale,  est,  sed  quatenus  sensible  est,  sensui  congruit.  Tullius  participare 
hominem  cum  brutis.  eo  quod  sentit,  sed  ratione  ab  eo  differre.  Et  alio  loco : 
jus  naturale  esse  commune  omnium  Quiritium,  veluti  ut  se  velint  tueri:  sed 
hoc  distare  hominem  a  bellua,  quod  bellua  sensu  moveatur,  homo  etiam  ra- 
tione." 
'  Rossi. 


ON  THE  HISTORICAL  METHOD.  13 

Solon  was  right  when  he  gave  the  Athenians  not  the  most 
perfect  laws,  but  the  best  which  they  could  bear. 

It  is  not  in  the  attempts  contemporary  with  the  infancy  of 
society,  or  nearly  so,  that  we  are  to  look  for  the  complete  reali- 
zation of  the  precepts  of  the  natural  law ;  for  principles  obey 
the  rule  laid  down  by  Aristotle.  "  The  nature  of  each  thing 
is  precisely  that  which  constitutes  its  end;  and  when  each  be- 
ing has  attained  its  entire  development,  we  say  that  that  is  its 
own  proper  nature."  ^ 

The  ideas  of  natural  law  are  purified  in  proportion  as  soci- 
ety grows  enlightened  and  free;  but  the  truth  appears  only 
successively  in  the  phases  it  passes  through.  It  allows  us  to 
grasp  one  aspect  of  itself  after  another,  but  does  not  surrender 
itself  entirely,  at  an}^  one  moment,  to  the  investigations  of  the 
historian  or  the  jurisconsult. 

History  and  philosophy  interpenetrate  and  complement  one 
another. 


III. 

The  two  schools,  that  of  philosophy  and  that  of  history 
have  met  in  our  day,  in  the  field  of  law.  Who  is  there  that 
does  not  remember  the  great  and  noble  contest  carried  on, 
about  the  beginning  of  this  century,  between  two  descend- 
ants of  Frenchmen  who  had  sought  a  refuge  in  Germany, 
and  who  united  in  their  own  persons,  and  in  so  marvelous  a 
manner,  the  different  aptitudes  of  the  country  they  owed  their 
origin  to,  and  of  the  land  that  gave  them  birth, —  between  Thi- 
baut  and  Savigny? 

It  would  be  difficult  to  find  a  scientific  question  of  a  higher 
character,  debated  by  champions  more  worthy  to  throw  light 
upon  it. 

The  Code  Napoleon  had  appeared.  It  had,  to  use  Rossi's 
happy  expression,  transferred  into  law  the  social  revolution 

>  Politics,  I,  ch.  I,  II. 


14:  PRELIMINARY  ESSAY 

produced  by  the  destruction  of  privilege.  It  was  the  practical 
formula  expressive  of  the  conquests  which  had  been  made. 

The  philosophy  of  the  eighteenth  century  had  previously 
inspired  the  Prussian  Code.  And  yet,  it  was  on  the  question  of 
codification  that  this  memorable  controversy  was  carried  on. 
The  two  principal  combatants,  while  manfully  battling,  the  one 
against  the  other,  continued  to  hold  each  other  in  high  esteem, 
and  the  profound  study  of  law  was  developed  in  the  midst  of 
the  melee. 

We  cannot  delay  long  on  this  subject,  nor  analyze  the  argu- 
ments advanced  by  Thibaut  ^  and  Savigny.^  What  interests 
us  at  present  is  not  so  much  the  question  debated,  as  the 
intellectual  movement  to  which  it  gave  birth.  Savigny  sus- 
tained the  ancient  law,  Thibaut  attacked  it.  Numerous  and 
distinguished  jurisconsults  ranged  themselves  on  the  one  side 
and  the  other.  A  new  school  grew  up  which,  with  the  most 
brilliant  success,  made  law  throw  light  on  history  and  history 
on  law. 

The  application  of  the  historical  method  to  the  study  of  law 
was  productive  of  the  most  happy  results. 

Without  acknowledging  it  to  themselves,  the  chiefs  of  the 
contending  parties  were  each  obeying  a  political  impulse. 
Savigny  was  by  his  birth  and  his  tastes  carried  into  the  camp 
of  conservatism ;  Thibaut,  led  by  his  convictions,  into  the  lib- 
eral ranks.  Nevertheless,  the  natural  elevation  of  their  genius 
preserved  them  from  all  exaggeration.  The  glorious  defender 
of  tradition  preserved  a  liberal  spirit,  and  the  ardent  advocate 
of  reform  desired  no  upheaval. 

In  what  more  nearly  concerns  the  question  with  which  we 
are  now  occupied,  Savigny — while  he  maintained  that  law  was 
something  contingent,  human,  national;  and  while  he  brought 
out  into  relief  the  practical  and  exalted  character  of  its  succes- 
sive  developments   which    introduced   reform    and   guarded 

*  Ueber  die  Nothwendigkeit  eines  Allgemeinen  burgerlichen  Rechts  fur 
Deutschland. 

*  Vom  Beruf  unserer  Zeit  fur  Gesetzgebung,  etc. 


ON  THE  HISTORICAL  METHOD.  15 

against  revolution  —  developments  which,  not  confiding  in  the 
letter  of  the  written  law,  unceasingly  feed  the  living  and 
created  law,  that  law  called  in  the  energetic  language  of  a 
great  jurisconsult,  a  law  Ccrit  es  cocurs  dcs  citoyens  —  is  far  from 
denj'ing  the  importance  of  a  high  and  healthy  philosophy 
which  directs  man  in  the  uninterrupted  labor  to  which  he  is 
called,  in  the  sphere  of  jurisprudence. 

JNIen  can  no  more  renounce  law  than  language,  the  forms  of 
which  last  the}'  have  gradually  modified  in  order  to  better 
translate  their  thoughts  into  words.  The  legislator's  task  is 
the  successive  elaboration  of  obligatory  provisions.  He  will 
sometimes  oppose  and  sometimes  second  the  natural  progress 
of  law ;  but,  in  doing  so,  it  wall  ever  be  necessary  for  him  to 
ascend  to  the  nature  of  things,  and  grasp  their  relations,  if  he 
would  not  go  astray  in  practice,  or  lose  himself  among  the 
successive  and  partial  changes  to  which  the  illustrious  Berlin 
professor  would  confine  the  legitimate  ambition  of  legislative 
power.  To  go  beyond  this,  in  an  age  like  ours,  seemed  to 
him  to  be  a  work  of  destruction.  However,  far  from  den3ang 
the  influence  of  thought,  and  therefore  of  philosophy,  acting 
within  its  sphere,  Savign}'-  invokes  its  fertile  aid. 

Thibaut,  on  the  other  hand,  with  more  confidence  in  the 
powers  of  the  spirit  of  modern  times,  did  not  believe  a  good 
codification  to  be  impossible.  His  starting  point  had  been  a 
cry  for  national  independence  He  well  knew  how  much  vene- 
ration was  due  those  institutions  which  were  the  slow  and  pro- 
gressive work  of  national  genius,  and  what  w\as  the  power  they 
possessed.  He  wished,  therefore,  to  reform,  not  to  abolish 
them.  He  well  understood  that  the  greatness  of  the  Code  jVa~ 
■poleon  itself,  and  the  respect  w^hich  it  inspired  were  due  to  the 
fact  that  its  roots  ran  deep  into  the  soil  of  the  past,  even  while 
the  modern  idea  it  contained  shone  like  a  bright  light  in  the 
world  of  things.  Hence,  without  contesting  the  value  of  his- 
tory, he  refused  to  acknowledge  its  right  to  exclusive  reign.^ 

1  In  one  of  his  latest  productions  (Ueber  die  sogennante  historische  und 
nicht  historische  Rechtsschule,  Archives  du  Droit  Civil,  Heidelberg,  XXI 


1G  PRELIMINARY  ESSAY 

The  life  and  activity  prevailing  in  the  study  of  law^,  and  the 
brilliant  successes  that  study  has  recently  achieved,  are  due,  in 
great  part,  to  the  illustrious  representatives  of  the  historical 
school.  We  may  add,  here,  that  the  French  historical  school, 
which  has  so  worthily  inherited  the  spirit  of  Montesquieu,  has 
not  achieved  less  in  this  direction  than  the  older  German 
school.     It  has  reconciled  the  opposing  but  not  mutually  hos- 

183S)  the  veteran  of  the  philosophical  school,  resuming  a  debate  begun  a  quar- 
ter of  a  century  before,  energetically  defends  himself  against  the  erroneous  in- 
terpretations which  it  was  sought  to  give  to  his  thoughts.  "  Does  it  follow," 
he  inquires,  "  that  because  a  man  is  desirous  of  reform,  he  must  surrender 
the  study  of  the  past?  And  if  there  be  new  laws  to  construe,  how  could  his 
evil  genius  deter  him  from  the  necessary  knowledge  of  ancient  laws?  Is 
there  a  single  jurisconsult,  who,  in  the  hope  of  a  better  future,  despises  the 

meaning  and  spirit  of  that  which  still  exists?     I  do  not  know  even  one 

And  when  I  am  accused  of  passing  by  the  institutions  of  the  past  with  cold- 
ness and  hatred  in  my  heart,  because  I  was  one  of  the  first  to  express  the 
hope  of  a  better  future,  a  charge  is  laid  at  iny  door  which  is  perfectly  incom- 
prehensible ....  I  am  reproached  with  despising  the  history  of  law.  It 
is  a  slander  on  me.     Although  I  have  only  laughed  at  these  reports,  one 

man's  mistake  grieved  me;  for  that  man's  name  was  Niebuhr When 

he  [Niebuhr]  returned  from  Italy  to  devote  himself  entirely  to  science,  in 
his  retreat  at  Bonn,  he  passed  through  Heidelberg,  where  he  remained  five 
or  six  days.  During  a  great  part  of  that  time  we  came  frequently  together. 
He  was  at  first  a  little  cold ;  but  Cicero  made  us  friends.  After  a  happy 
word  let  drop  concerning  that  writer,  he  asked  me  what  I  thought  of  him. 
I  answered  laconically:  'If  they  were  burning  all  the  Latin  authors,  and 
I  were  permited  to  grant  a  pardon  to  one  of  them,  I  should  say,  without 
hesitation:  Spare  the  works  of  Cicero.'  He  joyfully  exclaimed:  'I  have 
at  last  found  a  man  who  judges  rightly  of  Cicero.  I  share  your  admiration 
for  him,  and  that  is  the  reason  I  have  given  my  boy  the  name  of  Marcus.' 
The  ice  was  now  broken,  and  he  frankly  told  me  that  he  could  not  under- 
stand how  I  could  be  an  inveterate  enemy  of  Roman  law  and  of  the  history 
of  law.  I  gave  him  to  understand  that  I  had  simply  been  slandered,  and  I 
added,  that,  in  order  to  live  entirely  with  the  classics,  I  had  always  refused 
to  give  legal  advice,  or  act  as  a  counsellor,  although  I  might  have  made  a 
fortune  in  that  way.  I  told  him  that  I  owed  my  gayety  and  vigor,  in  great 
part,  to  my  love  for  the  classics  of  all  ages,  even  those  outside  the  domain 
of  jurisprudence;  but  that  I  held,  above  all  things,  to  the  good  qualities  of 
the  German  nation,  and  that  I  did  not  hesitate  to  say  with  Facciolatus: 
'Expedit  omnes  gentes  Romanis  legibus  operam  dare,  suis  vivere.' 

"  When  he  heard  those  words  of  mine,  he  exclaimed  with  his  usual  energy 


ON  THE  HISTORICAL  METHOD.  17 

tile,  tendencies  of  Savigny  and  Thibaut.  It  has  conscien- 
tiously scrutinized  facts  to  show  their  concatenation,  and  to 
allow  their  meaning  and  bearing  to  be  clearly  grasped.  A 
French  jurisconsult,  who  is  at  the  same  time  our  highest  au- 
thorit}'  in  the  natural  law,  opened  the  way  by  his  excellent  es- 
says on  the  necessity  of  reforming  the  historical  studies  appli- 
cable to  law ;  on  the  influence  of  the  legists  on  French  civiliza- 
tion ^  etc. ;  and  by  his  prefaces,  equal  in  value  to  whole  works, 
on  hypothecation,  sales,  loans,  partnership,  charter-parties  etc. 
He  may  truly  be  said  to  have  renewed  the  ancient  and  prolific 
alliance  of  history  and  law. 

Instead  of  pursuing  a  pure  abstraction,  this  historical  school 
has  confined  itself  to  the  knowledcfe  of  the  life  of  man  and  the 
evolution  of  society.  It  has  applied  to  law,  with  what  success 
is  well  known,  the  principle  which  has  regenerated  the  social 
sciences,  philosophy,  letters,  history.  Political  Economy, —  sci- 
ences which  are,  so  to  speak,  different  provinces  of  one  intel- 
lectual empire,  which  interpenetrate  one  another  without  being 
confounded  one  with  another,  between  which  no  jealous  bar- 
rier should  be  raised,  and  between  which  reciprocity  of  ex- 
change should  be  encouraged  by  the  suppression  of  factitious 
duties,  which  have  existed  only  too  long. 

and  vivacity :  '  Habes  me  consentientem,  labcs  mc  consentientem.'  From 
that  moment  all  coldness  between  us  Avas  at  an  end,  and  we  approached, 
without  any  embarrassment,  a  host  of  questions  in  one  conversation  in 
which  I  endeavored,  as  I  had  before,  to  learn  from  him. 

"Thus  I  receive  with  sincere  gratitude,  all  the  worses,  both  useful  and  pro- 
found, which  have  appeared  in  our  day  on  the  history  of  law.  It  would  be 
folly  in  me  to  deny  the  impetus  which  the  study  of  positive  law  has  re- 
ceived. New  sources  have  been  discovered.  Their  newness  and  import- 
ance have  excited  the  zeal  of  many  scholars  who  have  studied  them  pro- 
foundly ;  a  fact  which  made  a  review  of  the  older  sources,  still  by  far  the 
most  important,  necessary.  These  two  circumstances  soon  rendered  it  im- 
perative to  proceed  to  the  making  of  scrupulous  dogmatic  researchc'^.  Thus 
there  now  is  a  new  life  among  jurisconsults,  and  a  great  activity,  which,  it 
is  my  hope,  may  continue  long." 

'  Revue  dc  Legisl.  et  de  Jurisprudence,  1834-35. 
Vol.  L— 2 


18  PRELIMINARY  ESSAY 


IV. 


We  need  not  dwell  any  longer  on  the  character  of  the  his- 
torical method  as  applied  to  law,  nor  on  the  services  it  has 
already  rendered.  On  this  point,  there  can  be  no  two  opinions. 
And,  if  any  one  wonders  that  we  should  speak  of  it  at  all,  in  a 
work  on  Political  Economy,  we  can  only  say  to  him,  that  we 
have  done  so  to  call  his  attention  to  an  instructive  precedent, 
and  for  the  further  reason  that  the  same  method  is  peculiarly 
well  adapted  to  the  study  of  Political  Economy.  Its  advantages 
are  the  same  here,  its  tendencies  the  same,  and  the  same  mo- 
tives exist  to  induce  us  to  use  it  here.  In  describing  the  suc- 
cessive phases  of  the  question  in  the  case  of  law,  we  have 
performed  an  important  part  of  the  task  we  had  imposed  upon 
ourselves,  of  vindicating  the  employment  of  the  historical 
method,  in  the  sphere  of  Political  Economy. 

The  study  of  history  is  the  best  and  most  powerful  antidote 
against  social  romances  and  ideal  fancies.  Francois  Beau- 
douin  was  right  when  he  said:  "  Cceca  sine  historia  jurisfru- 
dentia;''''  and  we  are  very  sure  that,  without  history  as  an 
element  in  it,  Political  Economy  runs  a  great  risk  of  walking 
blindfold. 

The  human  mind  has  need  of  being  able  to  know  where  it 
is  at  any  moment,  surrounded,  as  it  is,  by  so  many  roads,  run- 
ning in  so  many  different  directions.  It  ought  to  account  to 
itself  for  its  progress,  its  deviations  from  the  right  path,  and 
for  its  mistakes.^  JHistory  alone  can  throw  any  light  on  ques- 
tions which  are  not  simply  intellectual  curiosities,  but  which, 
rather,  are  most  deeply  concerned  with  the  vital  interests  of 
society.  It  confirms  the  noble  teachings  of  philosophy,  by 
showing  how  our  life  is  made  up  of  one  unchanging  tissue  of 
relations,  and  how  man,  even  if  he  may  vary  their  colors,  and 
change  their  design,  cannot  renew  their  texture. 

It  teaches  us  to  admire  nothing,  and  to  despise  nothing,  be- 

^  Rossi. 


ON  THE  HISTORICAL  METHOD.  19 

yond  measure.  It  enlightens  us  concerning  questions  of  a 
very  complicated  nature.  Witnessing  the  evolutions  of  hu- 
manity, following  the  development  of  social  facts  and  theories, 
we  better  discern  principles,  and  grow  wary  in  relation  to  the 
alchemists  of  thought,  who  imagine  that  society  may  be  made 
to  undergo  a  transformation  betw^een  the  rising  and  the  setting 
of  the  sun. 

As  there  is  a  natural  law,  so,  too,  there  are  certain  princi- 
ples of  Political  Economy  which  emanate  from  philosophy,  and 
may  be  reduced  to  one  supreme  principle ;  that  of  liberty  and 
responsibility.  The  domain  of  Political  Economy  is  the  labor 
of  generations.  But  we  reject  with  all  our  strength,  the  ma- 
terialistic doctrine  which,  inexplicably  confusing  matters,  en- 
deavors to  assimilate  ideas  so  distinct  as  intelligence  and 
things ;  and  which  would  descend  so  low  as  to  employ  the 
dynamometer  to  measure  the  creative  force  of  man  and  its  re- 
sults, and  which  sees  only  figures  where  there  is  a  living  soul. 

Man  is  an  intelligent  being,  served  by  organs,^  by  -personal 
organs,  with  which  the  Creator  has  endowed  him,  by  giving 
him  a  body  provided  with  marvellous  aptitudes,  by  external 
organs  which  he  finds  in  nature  subjected  to  his  power.  Man 
was  created  in  the  image  of  God,  say  the  Scriptures,  and 
these  words  contain  a  deep  meaning.  He  alone,  of  all  terres- 
trial beings,  possesses  a  spark  of  divine  intelligence.  He  alone 
has  been  called  to  pursue  the  magnificent  work  of  creation,  by 
giving  a  new  face  to  a  world  to  which  he  cannot  add  so  much 
as  an  atom. 

Labor  is  nothing  but  the  action  of  spirit  on  itself  and  on 
matter.^  Hence  its  dignity  and  grandeur.  Hence,  also,  the 
difficulties  in  the  way  of  economic  studies;  since,  to  consider 
them  only  as  concerned  with  questions  of  material  production, 
is  to  forget  that  the  products  of  industry  are  made  for  man, 
not  man  for  industrial  products;  to  ignore  the  close  relation- 

'  M.  de  Bonald. 

^  M.  C<>?^«'«  has  brought  this  out  in  an  admirable  manner  in  his  lectures 
on  Adam  Smith.     Cours  de  Philosophie  Moderne. 


20  PRELIMINARY  ESSAY 

ship  between  their  fruitful  investigations  and  the  whole  circle 
of  the  moral  sciences ;  to  debase  them  and  to  mutilate  them. 

From  the  moment  that  science  concerns  itself  with  man 
only,  and  the  action  of  the  mind ;  from  the  moment  that  its  end 
becomes  not  simply  material  enjoyment,  but  moral  elevation, 
the  questions  it  discusses  become  indeed  more  complex,  but 
the  answer,  when  found,  is  more  prolific  in  results.  Wealth, 
then,  is  treated  only  as  one  of  the  forces  of  civilization.  Other 
interests  than  purely  material  ones  occupy  the  first  place. 
This  matter-of-fact  philosophy  which,  according  to  Bacon's 
precept,  seeks  to  improve  the  conditions  of  life,  bears  in  mind, 
that  the  most  fruitful  source  of  material  development  lies  in 
intellectual  development.  It  humbly  recognizes  that  it  is  not 
the  first-born  of  the  family,  and  draws  new  strength  from  this 
avowal.  From  the  moment  that  it  is  the  mind  which  -produces 
and  which  governs  the  world,  intellectual  and  moral  perfection 
become  the  cause  and  effect  of  material  progress.  "  But  seek 
ye  first  the  kingdom  of  God  and  his  righteousness,  and  all 
these  things  shall  be  added  unto  you." 

The  increase  of  production,  then,  appears  an  instrument  of 
elevation  in  the  moral  order,^  It  is  energy  of  soul,  intelligence 
and  manly  virtue  which  constitute  the  chief  source  of  the  wealth 
of  nations ;  which  create  it,  develop  it,  and  preserve  it.  Wealth 
increases,  declines,  and  disappears  with  the  increase,  decline 
and  disappearance  of  these  noble  attributes  of  the  soul. 

Labor  is  the  child  of  thought.  Nothing  happens  in  the  ex- 
ternal world  which  was  not  first  conceived  in  the  mind.  The 
hand  is  the  servant  of  the  intellect ;  and  its  work  is  successful, 
beautiful  or  useful  in  proportion  to  the  activit}'^  and  develop- 
ment of  the  intellect,  and  in  proportion  as  the  just,  the  beauti- 
ful and  the  good  exert  their  power  over  it. 

Production  is,  therefore,  not  a  material,  but  a  spiritual,  work. 
How,  then,  can  acts  and  their  morality  be  separated?  How 
not  understand  that  the  market  of  labor  has  its  own  distinct 

'  Chantiins^. 


ON  THE  HISTORICAL  METHOD.  21 

laws,  and  that  education,  even  from  a  material  stand-point,  be- 
comes the  highest  interest  and  the  most  important  duty  of 
society,  since  on  it  depends  the  efficiency  of  labor? 

From  the  time  that,  after  a  long  series  of  years,  the  doctrine 
of  Christianit}^  had  permeated  the  law  of  the  civilized  w^orld; 
from  the  time  that  the  teaching  of  Paul,  that  all  men  are  chil- 
dren of  one  Father,  took  form  and  body,  and  that  the  principle 
of  the  equality  of  all  men  before  their  Maker,  was  supple- 
mented by  the  doctrine  and  by  the  practice  of  that  equality 
before  the  laws,  the  thinking  masses  have  endeavored  to  dis- 
cover the  wherefore  of  their  actions,  and  the  why  of  their  suf- 
ferings. They  have  called  the  past  to  account,  and  inquired 
why  they  have  obtained  so  limited  a  share. 

The  people,  therefore,  think;  and  it  is,  therefore,  a  matter  of 
im.portance  that  they  should  think  aright.  It  is  of  importance, 
that  they  should  be  guarded  against  fallacious  Utopian  prom- 
ises. Henceforth,  there  is  no  security  for  the  stabiUty  of  the 
world  but  in  the  contentment  of  minds.  There  is  no  rest  for 
mankind,  unless  men  will  understand  the  conditions  of  their 
destiny ;  unless,  instead  of  running, 

"  Tovijours  insatiable  et  jamais  assouvis," 

after  the  intoxicating  cup  of  material  enjoyment  —  for  wants 
not  governed  by  the  intellect  and  the  heart  are  infinite  in  num- 
ber, and  the  gratification  of  one  gives  birth  to  another  —  they 
submit  to  the  law  of  sacrifice,  and  give  play  to  the  noblest 
faculty  with  which  the  Creator  has  endowed  us,  moral  empire 
over  self. 

"We  shall  meet  on  this  road,  hard  of  ascent,  not  only  peace 
of  soul,  but  goods,  more  real  and  more  numerous,  than  those 
with  which  the  allurements  of  error  would  dazzle  our  eyes. 
The  greatest  obstacles  to  be  overcome  are  not  material  ones, 
but  moral  difficulties.  As  Franklin  says,  in  substance,  he  that 
tells  you  you  can  succeed,  in  any  way  but  by  labor  and  econ- 
omy, is  a  quack. 

But  labor  is  more  productive  in  proportion  as  it  is  more  in- 


22  PRELIMINARY  ESSAY 

telligent,  as  hand  and  mind  keep  pace  with  each  other,  as 
good  moral  habits  generate  order  and  voluntary  discipline. 

Economy  is  sacrifice,  binding  the  present  to  the  future, 
widening  the  horizon  of  thought,  inspiring  foresight,  lengthen- 
ing the  lever  of  human  activit}-,  by  providing  it  with  new  in- 
struments. 

Life  ceases  to  be  a  worry  about  how  the  body  shall  be  sus- 
tained, and  the  material  world  becomes  the  shadow  of  the 
spiritual.  The  former  is  made  to  serve  the  latter,  and  man's 
free  effort  lifts  him  into  a  higher  region  of  thought,  and  into  a 
larger  field  of  action.  The  more  mind  there  is  put  into  a  piece 
of  work,  says  Channing,  the  more  it  is  worth. 

We,  men  of  to-day,  are  lookers-on  at  a  marvelous  spectacle. 
Steam  furrows  the  earth.  Industry  has  taken  an  immense 
start.  Mechanical  force  bends  the  most  rebellious  materials. 
Chemistry,  physics  and  the  natural  sciences  are  discovering  a 
new  world.  But  whence  all  this?  What  is  the  principle  of 
this  new  life?  We  answer:  intellectual  and  moral  progress. 
Mind  has  grown ;  the  soul  has  been  expanded.  God  has  per- 
mitted man  to  be  free,  and  furnished  him  with  the  means  to 
be  so. 

Thus  man,  as  Mignet  has  said,  becomes  that  Inighty  creature 
to  whom  God  has  given  the  earth  for  the  vast  theater  of  his 
action,  the  universe  as  the  inexhaustible  object  of  his  knowl- 
edge, the  forces  of  nature  for  the  growing  service  of  his  wants, 
by  allowing  him,  by  ever  increasing  information,  to  obtain  an 
ever  increasing  amount  of  well-being. 

Man  is  free. —  1 789  put  in  action  the  sublime  precept  of  the 
gospel.  He  holds  his  destiny  in  his  own  hands.  But  the 
rights  which  he  enjoys  impose  new  duties  on  him.  If  equality 
be  the  sentiment  which  predominates  in  our  day,  we  should 
take  care  not  to  confound  it  with  the  leveling  of  Communism. 
Nor  is  it  externally  to  us,  but  within  ourselves,  that  it  should 
be  developed,  by  intellectual  and  moral  culture. 

History  preserves  the  student  from  being  led  astray  by  a  too 
servile  adherence  to  any  system.     It  exposes  the  folly  of  the 


ON  THE  HISTORICAL  ISIETHOD.  23 

"  social  contract,"  and  of  the  idyllic  dreams  of  the  advantages 
of  savage  life.  It  shows  that  nature,  instead  of  being  prodigal 
of  her  treasures,  distributes  them  with  a  niggardly  hand,  and 
that  it  is  necessary  to  conquer  her  by  labor,  intelligence  and  pa- 
tience before  we  can  control  her. 

It  shows  us  human  liberty  growing  stronger  every  day, 
thanks  to  moral  and  intellectual  progress,  supported  by  the 
two  powerful  props  of  property,  the  complement  of  man,  the 
material  reflection  of  his  spiritual  power;  and  capital,  the  fruit 
of  abstinence,  the  symbol  of  moral  power  and  the  result  of 
enlightened  activity. 

History  w'alks  with  a  firm  step,  because  it  feels  secure  in  a 
knowledge  of  the  laws  of  human  nature,  and  in  its  experience 
of  the  sucessive  manifestations  of  social  life.  Instead  of  the 
vagueness  of  ideal  conceptions,  it  allows  us  to  grasp  and  to 
appreciate  what  is  real  in  life.  It  does  not  confine  itself  to  the 
study  of  man.  It  makes  us  acquainted  with  men,  whose 
wants  extend  and  are  ennobled  in  proportion  to  the  perfection 
of  their  faculties.  The  feelings  and  the  intellect  are  simul- 
taneously developed  in  man.  The  savage  is  the  most  egotis- 
tical of  men. 

Hence,  we  believe  that  Political  Economy  cannot  dispense 
with  the  services  of  morals  and  philosophy,  of  history  and 
law;  for  these  are  branches  of  one  common  trunk,  through 
aU  of  which  the  self-same  sap  circulates. 


V. 


The  isolation  of  the  theory  of  Political  Economy  is  peculiar 
to  our  own  day.  In  more  remote  times,  we  find  this  study 
confounded  with  the  other  moral  sciences,  of  which  it  was  an 
integral  part.  When  the  genius  of  Adam  Smith  gave  it  a 
distinct  character,  he  did  not  desire  to  separate  it  from  those 
branches  of  knowledge  without  which  it  could  only  remain  a 
bleached  plant  from  the  absence  of  the  sunlight  of  ethics. 


24  PRELIMINARY  ESSAY 

We  must  renounce  the  singular  idea,^  that  thousands  of 
years  could  pass  awa}^  without  leaving  any  trace  of  what  en- 
lio-htened  men  had  thought  and  elaborated  in  the  matter  of 
Political  Economy,  among  so. many  nations,  and  that  people 
should  never  have  thought  of  cultivating  this  rich  intellectual 
domain,  while  in  every  other  direction,  it  is  easy  for  us  to  as- 
cend by  a  road  already  cleared  up  to  the  most  remote  antiquity. 

It  has  already  been  acknowledged,  that  the  classic  domain^ 
fertilized  by  intellectual  culture  on  a  large  scale  and  on  a  small 
one,  was  exceedingly  rich  in  valuable  indications,  although 
they  do  not  present  themselves  under  the  distinct  form,  which 
later  affected  the  different  branches  of  public  life. 

As  to  the  pretended  ■primitive  simplicity  of  the  middle  ages, 
which  it  is  claimed,  prevailed  during  that  period,  a  species  of 
economic  vegetation,  those  who  maintain  it  forget  the  long 
series  of  communistic  theories  which,  at  near  intervals,  found 
expression  in  many  a  bloody  struggle,  and  whose  repression  re- 
quired the  combined  efforts  of  Church  and  State. 

Doubtless,  it  is  not  in  their  modern  forms  that  the  elements 
of  politico-economical  science  are  to  be  found,  in  the  past.  But 
when  we  succeed  in  reuniting  the  scattered  and  broken  parts; 
when  we  have  made  our  way  into  the  customs,  decrees,  ordi- 
nances, capitularies,  laws  and  regulations  of  those  times ;  when, 
so  to  speak,  we  come,  unaware,  upon  the  life  of  nations,  in  the 
most  ingenuous  and  confidential  documents  which  reflect  it 
most  faithfully  because  most  simply,  we  may  well  be  astonished 
at  the  results  obtained.  Where  we  expected,  perhaps,  to  find 
only  erudition,  we  reap  a  rich  harvest  of  lessons  which  are  all 
the  more  valuable  for  being  disinterested. 

Legislative  and  administrative  acts  frequently  develop  real 
economic  doctrines.  It  is  easy  to  discover  in  them  the  onward 
course  of  a  theory  which  plunges  directly  into  practical  appli- 
cations. 

What  results  might  we  not  expect  from  these  efforts,  if  the 

'  Knies.  Die  politische  CEkonomic  vom  Standpunkte  der  geschichtlicheu 
Methode,  Braunschweig,  1853. 


ON  THE  HISTORICAL  METHOD.  25 

genius  of  investigation  and  of  di^'ination,  which  has  so  ele- 
vated historical  studies  in  our  da}^  should  have  an  observing 
and  penetrating  eye  in  this  direction!  How  limited  was  the 
field  on  which  Gu6rard  erected  the  scientific  monument  which 
he  has  left  us  in  his  Polypiquc  d''  Irminon;  and  how  precious 
are  the  lessons  he  leaves  us,  since  we  have  here  to  do,  not 
W'ith  the  histor}-  of  professed  doctrines  or  unlooked-for  events, 
but  with  the  historical  development  of  economic  society  which 
shows  us  the  living  march  of  principles. 

VI. 

Political  Economy  is  not,  as  we  have  just  said,  a  new  sci- 
ence. It  has  been  a  distinct  science  only  a  short  time.  Until 
the  eighteenth  century,  it  was  confounded  with  philosophy, 
morals,  politics,  law  and  history.  But  it  does  not  follow,  that, 
because  it  has  grown  so  in  importance,  as  to  deserve  a  place 
of  its  own,  its  intimate  relationship  with  the  noble  studies 
which  had  until  then  absorbed  it  should  cease.  There  is  an- 
other consequence  also  to  be  deduced  from  this.  From  the 
moment  that  Political  Economy  ceases  to  be  considered  a  new 
science,  it  finds  a  long  series  of  ancestors  behind  it,  since  it 
is  compelled  to  investigate  a  past  to  which  so  many  bonds 
unite  it.  This  duty  may  increase  its  difficulties,  but,  at  the  same 
time,  it  singularly  adds  to  the  attractions  of  a  study  which,  in- 
stead of  presenting  us  onl}^  with  the  arid  deductions  of  dog- 
matism, comes  to  us  with  iill  the  freshness  and  all  the  color  of 
life. 

We  may  allow  those  who  make  Political  Economy  simply  a 
piece  of  arithmetic  to  ignore  these  retrospective  studies  and 
their  importance;  for  mathematics  has  little  to  do  with  his- 
tor}'.  But  it  is  otherwise  with  the  life  of  nations.  These 
would  discover  whence  they  come,  in  order  to  learn  whither 
they  are  tending. 

The}^  are  not  obeying  a  vain  interest  of  curiosity,  as  J.  B. 
Say  supposed,  when,  in  sketching  a  short  history  of  the  prO' 


26  PRELIMINARY  ESSAY 

gress  of  Political  Economy,  he  said:  "  However,  every  kind 
of  history  has  a  right  to  gratify  curiosity."  It  is  a  thing  to  be 
regretted,  that  this  eminent  thinker  could  thus  ignore  one  of 
the  essential  elements  of  the  science  to  which  he  rendered 
such  great  and  unquestioned  services.  A  sense  for  the  his- 
torical was  wanting  in  him.  "  The  history  of  a  science,"  he 
writes,^  "  is  not  like  the  narration  of  things  that  have  happened. 
What  would  it  profit  us  to  make  a  collection  of  absurd  opin- 
ions, of  decried  doctrines  which  deserved  to  be  decried  ?  It 
would  be  at  once  useless  and  fastidious  to  thus  exhume  them 
in  case  we  perfectly  knew  the  public  economy  of  social  bod- 
ies. It  can  be  of  little  concern  to  us  to  learn  what  our  pred- 
ecessors have  dreamed  about  this  subject,  and  to  describe  the 
long  series  of  mistakes  in  practice  which  have  retarded  man's 
progress  in  the  research  after  truth.  Error  is  a  thing  to  be 
forgotten,  not  learned."  As  if  that  which  was  once  to  be 
found  in  time  is  not  to-day  to  be  found  in  space ;  as  if  there 
ever  was  an  institution  that  did  not  have  its  raison  d''  etre  and 
had  not  constituted  a  resting  place  in  the  search  after  a  higher 
truth  or  of  a  more  intelligent  and  salutary  application  of  an  old 
one!  There  are  a  great  many  actual  S3^stems  and  a  great 
many  present  facts  which  can  be  understood  only  by  the  help 
of  history;  and  how  frequently  would  not  an  acquaintance 
with  history  serve  to  keep  us  from  taking  for  marvelous  in- 
ventions the  antiquated  machinery  of  other  ages,  whose  only 
advantage  and  only  merit  are  that  they  have  remained  un- 
known. How  much  of  the  pretended  daring  of  innovators  has 
been  old  trumpery  which  the  wisdom  of  the  times  had  cast 
off  as  rubbish.  Besides,  as  Bacon  has  said:  "Verumtamen 
s^pe  necessarium  est,  quod  non  est  optimum." 

'  Cours  Complet  d'  Economie    politique,  II,  540,  ed.  Guillaumin. 


ON  THE  HISTORICAL  METHOD.  27 


VII. 

It  is  not  the  result  of  mere  chance  that  the  greatest  econo- 
mists have  been  both  historians  and  philosophers.  We  need 
only  mention  Adam  Smith,  Turgot,  Malthus,  Sismondi,  Droz, 
Rossi  and  Leon  Faucher.  It  is  too  frequently  forgotten  that 
the  father  of  modern  Political  Economy,  Adam  Smith,  looked 
upon  the  science  as  only  one  part  of  the  course  of  moral  phi- 
losophy which  he  taught  at  Glasgow,  and  which  embraced 
four  divisions: 

1.  Universal  theology.  —  The  existence  and  attributes  of 
God;  principles  or  faculties  of  the  human  mind,  the  basis  of 
religion. 

2.  Ethics. —  Theory  of  the  moral  sentiments.  • 

3.  Moral  principles  relating  to  justice. — •  In  this,  as  we  learn 
from  one  of  Adam  Smith's  pupils  in  a  sketch  preserved  by 
David  Stewart,  he  followed  a  plan  which  seems  to  have  been 
suggested  to  him  by  Montesquieu.  He  endeavored  to  trace  the 
successive  advances  of  jurisprudence  from  the  most  barbarous 
times  to  the  most  polished.  He  carefully  showed  how  the 
arts  which  minister  to  subsistence,  and  to  the  accumulation  of 
property,  act  on  laws  and  governments,  and  are  productive 
of  advances  and  changes  in  them  analogous  to  those  they  ex- 
perience themselves. 

In  the  first  part  of  his  course,  as  we  learn  from  the  same 
authority,  he  examined  the  various  political  regulations  not 
founded  on  the  principle  of  justice  but  in  expediency,  the 
object  of  which  is  to  increase  the  wealth,  the  power  and  the 
prosperity  of  the  state.  From  this  point  of  view,  he  consid- 
ered the  political  institutions  relating  to  commerce,  finance,  the 
ecclesiastical  and  military  establishments.  His  lectures  on  the 
different  subjects  constitute  the  substance  of  the  work  he  after- 
wards published  on  the  wealth  of  nations.  A  pupil  of  Hut- 
cheson,  Adam  Smith  always  applied  the  experimental  method, 
"  which,  instead  of  losing  itself  in  magnificent  and  hazardous 


28  PRELIMINARY  ESSAY 

speculations,  attaches  itself  to  certain  and  universal  facts  dis- 
covered to  us  by  our  own  consciousness,  by  language,  litera- 
ture, history  and  society."^  Before  taking  the  professorship 
of  philosophy,  Adam  Smith  had  taught  beUeslettres  and  rhet- 
oric in  Edinburgh,  in  1748.  He  had  written  a  work  on  the 
origin  and  formation  of  languages;  and  it  was  because  he  had 
profoundly  studied  the  moral  sciences  that  it  was  given  to  him 
to  inaugurate  a  new  science  and  to  become  a  great  economist. 
Mr.  Cousin  has  laid  great  stress  on  Adam  Smith's  taste  and 
talent  for  history.  "  Whatever  the  subject  he  treats,  he  turns 
his  eyes  backward  over  the  road  traversed  before  himself,  and 
he  illuminates  every  object  on  his  path  by  the  aid  of  the  torch 
which  reflection  has  placed  in  his  hand.  Thus,  in  Political 
Economy,  his  principles  not  only  prepare  the  future  but  renew 
the  past,  and  discover  the  reason,  heretofore  unknown,  of 
ancient  facts  which  history  had  gathered  together  without  un- 
derstanding them.  It  is  not  saying  enough  to  remark  that 
Adam  Smith  possessed  a  great  variety  of  historical  informa- 
tion ;  we  must  add  that  he  possessed  the  real  historical  spirit." 
Thanks  to  this  eminent  faculty  of  his,  the  Glasgow  philoso- 
pher acquired  great  influence  over  minds.  In  1810,  when  the 
French  empire  had  reached  the  zenith  of  its  greatness,  Mar- 
witz  wrote :  "  There  is  a  monarch  as  powerful  as  Napoleon : 
Adam  Smith."  We  need  not  recall  Turgot's  historical  re- 
searches. 

Malthus'  chief  title  to  distinction,  his  work  on  Population, 
is  as  much  a  historical  work  as  a  politico-economical  one ;  and 
it  is  not  sufficiently  known  that  he  was  professor  of  history 
and  Political  Economy  in  the  college  of  the  East  India  Com- 
pany at  A3'lesbury. 

We  need  say  no  more  on  this  subject.  The  works  of  the 
other  writers  whom  we  have  mentioned  are  too  well  known 
to  permit  an}^  one  to  think  that  they  excluded  history  and 
moral  science  from  the  study  of  Political  Economy.     Hence 

'  Cousin. 


ON  THE  HISTORICAL  METHOD.  29 

the  school  which  has  risen  up  in  Germany/  and  which  is  en- 
deavoring to  do  for  Pohtical  Economy  what  Savigny,  Eich- 
hom,  Schrader,  Mommsen,  RudorlT,  and  so  many  other  ilhis- 
trious  scholars  have  done  for  jurisprudence,  cannot  be  rightly 
accused  of  rashness.  It  has  done  nothing  but  unfurl  the  noble 
banner  borne  bv  the  most  venerated  masters  of  the  science. 


VIII. 

At  the  head  of  this  school  stands  William  Roscher,  profes- 
sor of  Political  Economy  at  the  University  of  Leipzig,  whose 
excellent  work.  The  Principles  of  Political  Economy,  in  which 
he  follows  the  histoj'ical  tnethod,,  we  have  just  translated. 
William  Roscher  is  (1857)  scarcely  forty  years  of  age.  He 
w'as  born  at  Hanover,  October  21,  1817.  His  laborious 
and  simple  life  is  that  of  a  worthy  representative  of  the  science. 
"  You  ask  me,"'  he  wrote  us  recently,  '•  to  give  you  some  in- 
formation concerning  the  incidents  of  my  life.  I  have,  thank 
God,  but  very  little  to  tell  you.  Lives  whose  history  it  is  in- 
teresting to  relate  are  seldom  happy  lives."  He  confined 
himself  to  giving  us  a  few  dates  which  are,  so  to  say,  the 
landmarks  of  a  career  full  of  usefulness.  Roscher,  from  1835 
to  1839,  studied  jurisprudence  and  philology  at  the  univer- 
sities of  Gottingen  and  Berlin.     The  learned  teachers  who  ex- 

'  We  here  append  an  extract  from  Hcinrich  ContzerCs  Geschichte,  Liter- 
atur,  und  Bedeutung  der  Nationalokonomie,  Cassel  und  Leipzig,  1S76,  p.  7: 
"  Roscher  ....  is  rightfully  considered  the  real  founder  and  the  principal  rep- 
resentative of  the  historical  school.  This  school  is  continually  gaining  in 
extent,  and  has  found,  both  in  Germany  and  in  France,  the  most  distin- 
guished disciples  —  men  who  honor  Roscher  as  their  teacher  and  master,  the 
leader  whose  beacon  light  they  follow.  Roscher  combines  the  richest  posi- 
tive learning  with  rare  clearness  and  plastic  beauty  in  the  presentation  of 
his  thought.  These  are  conceded  to  him  on  every  hand;  and  it  does  not  de- 
tract from  him,  or  alter  the  fact  that  he  possesses  them,  that,  here  and  there,  an 
ill-humored  or  maliciously  snappish  critic  calls  them  in  question."  It  should 
be  borne  in  mind  here  that  Wolowski  wrote  in  1S57;  Contzen,  like  Wolow 
ski,  a  politico-economical  -writer  of  mark,  in  1S76. —  Translator's  note. 


30  PRELIMINARY  ESSAY 

ercised  the  greatest  influence  on  his  intellectual  development 
were  the  historians  Gervinus  and  Ranke,  the  philologist  K.  O. 
Mliller  and  the  Germanist  Albrecht.  It  is  easy  to  see  that  he 
went  to  a  good  school,  and  that  he  profited  by  it.  He  was 
made  doctor  in  1838;  admitted  in  1840  as  Privat-docent  at 
Gottingen;  appointed  in  1843  professor  extraordinary  at  the 
same  university,  and  called  in  1844  to  fill  the  chair  of  titular 
professor  at  Erlangen.  Since  1848  he  has  acted  in  the  same 
capacity  in  the  University  of  Leipzig,  where  he  was  for  six 
years  member  of  the  Poor  Board,  where  he  teaches  also  in  the 
agricultural  college.  His  fame  has  grown  rapidly.  Many  of 
the  German  universities  have  emulated  one  another  for  the 
honor  of  possessing  him,  but  he  has  not  been  willing  to  leave 
Leipzig.  His  first  remarkable  work  was  his  doctor's  thesis: 
De  historiccB  doctrincB  a^iid  sophistas  majores  vestigiis,  written 
in  1838.  In  1842,  he  published  his  excellent  work,  which  has 
since  become  classical :  "  The  Life,  Labors  and  age  of  Thu- 
cydides."  ^  From  that  time,  important  works,  all  bearing  the 
stamp  of  varied  and  profound  scientific  acquirements,  and  of 
an  erudition  remarkable  for  sagacity  and  elegance,  have  fol- 
lowed one  another  without  interruption.  In  1843,  he  treated 
the  question  of  luxury  ^  with  a  master  hand,  and  laid  the  foun- 
dation of  his  great  work  —  only  the  first  part  of  which  has 
thus  far  appeared  —  at  the  same  time  tracing  on  a  large  scale 
the  programme  of  a  course  of  Political  Economy  according 
to  the  historical  method.''  In  1844,  he  published  his  historical 
study  on  Socialism  and  Communism,*  and  in  1845  and  1846, 
his  ideas  on  the  poHtics  and  the  statistics  of  systems  of  agri- 
culture.    He  is,  besides,  author  of  an  excellent  work  on  the 

»  Leben,  Werk  und  Zeitalter  des  Thukydides. 

"^Rail's  Archiv.,  Heidelberg.  This  remarkable  essay  has  since  appeared  in 
Roscher's  Ansichten  der  Volkswirthschatt  vom  geschichtlichen  Standpunkte, 
j86i. —  Translator'' s  note. 

3  Grundriss  zu  Vorlesungen  iiber  die  Staatswirthschaft  nach  geschichtlichet 
Methode. 

■*  Berliner  Zeitschrift  fiir  allgem.-Geschichte. 


ON  THE  HISTORICAL  METHOD.  31 

corn-trade  ;^  of  a  remarkable  book  on  the  colonial  system.;''  of  a 
sketch  on  the  three  forms  of  the  state  f  of  a  memoir  on  the  re- 
lations between  Political  Economy  and  classical  antiquity;*  of 
a  work  of  the  greatest  interest,  on  the  history  of  economic 
doctrines  in  England  in  the  sixteenth  and  seventeenth  centu- 
ries— a  work  full  of  the  most  curious  researches;^  of  a  book  on 
the  economic  principle  of  forest  economy,"  and  lastly,  of  the 
great  work,  the  first  part  of  which  we  have  translated,  under  the 
title  of  The  Principles  of  Political  Economy,  and  which  is  to 
be  completed  by  the  successive  publication  of  three  other  vol- 
umes, on  the  Political  Economy  of  Agriculture,  and  the  related 
branches  of  primitive  production,  the  Political  Economy  of 
Industry  and  Commerce,  and  one  on  the  Political  Economy  of 
the  State  and  the  Commune.  This  work,  when  completed, 
will  be  a  real  cyclopedia  of  the  science^ 

Side  by  side  with  William  Roscher,  we  must  mention  a 


'  Ueber  Kornhandel  und  Theuerungspolitik,  3d  ed.,  1S52. 

2  Untersuchungen  tiber  das  Kolonialwesen. 

3  Umrisse  zur  Naturlehre  der  drei  Staatsformen  (Berliner  Zeitschrift,  1847- 
1S4S). 

■*  Ueber  das  Verhiiltniss  der  Nationalokonomie  zum  klassischen  Alter- 
thume  (K.  Sachs  Akademie  der  Wissenschaft,  1S49).  Also  to  be  found  in 
Roscher's  Ansichten  etc. —  Translator. 

5  Zur  Geschichte  der  englischen  Volkswirthschaftslehre  im  16  und  17  Jahrh. 

*  Ein  nationalokonom.  Princep  der  Forstwirthschaft. 

"^  Roscher'' s  complete  work  he  calls  "A  System  of  Political  Economy."  It 
embraces  the  four  parts  above  referred  to;  but  each  of  these  parts  constitutes 
an  independent  work.  The  first  part,  or  the  Pi-inciples  of  Political  Economy, 
covers  the  ground  generally  covered  by  English  treatises  on  Political  Econ- 
omy. 

Besides  the  works  above  mentioned,  Professor  Roscher  has  written  Ansich- 
ten der  Volkswirtbschaftaus  dem  geschichtlichen  Standpunkte,  2d  ed.,  Leip- 
zig, 1861 ;  Die  deutche  Nationalokonomik  an  der  Grenzscheide  de,s  sechs- 
zehnten  und  siebenzehnten  Jahrhunderts,  Leipzig,  1862 ;  Griindungsgeschi- 
chte  des  Zollvereins,  Berlin,  1S70;  Betrachtungen  iiber  die  geographische 
Lage  der  grosscn  Stadte,  Leipzig,  1871;  Bcrtrachtungen  iiber  die  Wjihrungs- 
frage  der  deutschen  Mijnzreform,  Berlin,  1872 ;  Geschichte  der  National- 
okonomik in  Dcutschland,  Munich,  1874;  Nationalokonomik  des  Acker- 
baues,  Sth  ed.,  Stuttgart,  1875. — Translator'' s  note. 


32  PRELIMINARY  ESSAY 

young  economist,  Knies,  formerly  professor  at  the  University 
of  Marburg,  but  whom  political  persecution  compelled  to  ac- 
cept a  secondary  position  at  the  gymnasium  of  Schaffhausen, 
for  a  time,  and  who  fills,  to-day,  in  the  University  of  Freiburg, 
in  Breisgau,  a  position  more  worthy  of  his  great  talent.  We 
hope,  in  a  work  which  we  intend  to  publish,  on  Political 
Economy  in  Germany,  to  make  the  public  acquainted  with  the 
works  of  this  writer.  They  deserve  to  attract  the  most  seri- 
ous attention.  We  know  of  few  works  which  equal  his  Polit- 
ical Economy,  written  on  the  historical  method.^  We  shall 
also  have  something  to  say  of  another  economist,  formerly 
professor  at  Marburg,  a  victim,  also,  of  the  power  of  the 
elector  of  Hesse,  Hildebrand,  now  professor  at  the  Univer- 
sit}'-  of  Zurich.  His  National-CEkonomie  ^  is  a  book  replete 
with  interest,  and  we  have  nowhere  met  with  a  better  criti- 
cism of  Proudhon's  system,  than  in  its  pages.  If  the  new 
school  had  produced  but  these  three  men,  it  would  still  have 
left  its  impress  on  the  history  of  the  science. 

Other  works,  no  less  important,  will  claim  our  attention  in 
the  book  to  which  we  have  already  devoted  many  years  of 
•labor.  If  we  carry  out  our  intention,  we  shall  review  the 
works  of  a  great  many  scholars,  of  great  merit,  whose  names 
only  are,  unfortunately,  known  outside  of  Germany.  The 
works  of  Rau,  of  Hermann,  of  Robert  Mohl,  of  Hannsen, 
Helferich,  Schlitz,  Kosegarten,  Wirth  etc.,  are  a  rich  mine, 
from  which  we  hope  to  draw  much  valuable  information. 
Nor  shall  we  neglect  the  original  productions  of  J.  Moser,  the 
Franklin  of  Germany,  nor  the  quaint,  but  sometimes  striking, 
ideas  of  Adam  Miiller.  Lastly,  our  learned  friend.  Professor 
Stein  of  Vienna,  will  afford  us  an  opportunity  to  show  forth 
the  merit  of  important  ana  extensive  works,  animated  by  the 
philosophic  spirit.  For  the  present,  we  must  confine  ourselves 
to  a  view  of  the  application  of  the  historical  method  to  Political 
Econom}'-. 

'  Die  politische  CEkonomie  vom  Standpunkte  der  geschichtlichen  Methoda 
*  Die  National  CEkonomie  der  Gegenwart  und  Zukunft. 


ON  THE  HISTORICxVL  METHOD.  33 

There  is  a  rather  widespread  prejudice  existing  against  this 
order  of  works,  a  souvenir  of  the  struggle  carried  on  formerly, 
between  Thibaut  and  Savigny,  which  inclines  people  to  sup- 
pose that  the  historical  school  leans  towards  the  poHtical  doc- 
trines of  the  past,  and  that  it  is  hostile  to  the  liberal  spirit 
of  modern  times.  Nothing  can  be  farther  from  the  truth. 
The  names  of  Roscher,  Knies  and  Hildebrand  are  sufficient  to 
remove  this  prejudice.  Their  works,  inspired  by  an  enlight- 
ened love  for  progress,  do  not  allow  of  such  a  misconstruction. 
The  historical  point  of  view  does  not  consist  in  the  worship  of 
the  past,  any  more  than  in  the  depreciation  of  the  present.  It 
does  not  view  the  succession  of  phenomena  as  a  fluctuation  of 
events  without  unity  or  purpose.  On  the  contrary,  the  histor- 
ical method  harmonizes  wonderfully  well  with  the  w^ants  of 
genuine  progress.  The  changes  accomplished  bear  testimony 
to  the  free  and  creative  power  of  man,  acting  within  the  limit 
permitted  to  it  by  the  degrees  of  intelligence  reached,  of  the 
development  of  morals,  and  of  individual  liberty.  The  philos- 
ophy of  Political  Economy,  which  is  the  result  of  this  calm 
teaching,  free  from  the  passions  of  party  —  for  science  ac- 
knowledges no  adherence  to  party  —  is  like  that  of  law,  op- 
posed to  the,  more  or  less,  ingenious  or  rash  dreams,  which 
build  the  world  over  again  in  thought.  In  showing  how,  at 
all  times,  humanity  has  understood  and  applied  the  principles 
which  govern  the  production  of  wealth,  it  ma}^  sa}^  with  the 
Roman  jurisconsult:  "Justitiam  namque  colimus  ....  £Equum 
ab  iniquo  separantes  ....  veram  nisi  fallor  philosophiam,  non 
simulatam  aftectantes."  "The  human  mind,"  says  Rossi, 
"  endeavoring  to  attain  to  a  knowledge  of  itself,  estimating  its 
strength,  taking  a  method,  and  applying  it  with  a  conscious- 
ness of  its  mode  of  procedure  to  the  knowledge  of  all  things ; 
such  is  philosophy.  Without  it,  there  is  no  science  in  any 
branch  of  human  knowledge."  Thus  do  we  rise,  with  the  aid 
of  a  critical  mind,  by  careful  investigation  and  great  sagacity, 
to  the  truths  founded  on  observations  made. 
Vol.  I.— 3 


34  PRELIMINARY  ESSAY 

IX. 

There  is  another  method,  which,  starting  out  from  prin- 
ciples, evident  of  tliemselves,  develops  science  by  way  of 
conclusions  drawn,  after  the  manner  of  the  geometricians. 
The  apparent  severity  and  simplicity  of  this  method  are  very 
seductive,  and  very  dangerous,  when  we  have  to  deal  not  with 
figures,  but  with  men;  when  the  varied,  complex  and  delicate 
exigencies  which  accumulate  when  human  nature  comes  into 
play  do  not  exactly  square  with  the  formula ;  and,  when  in- 
stead of  dealing  with  abstractions,  we  have  to  tackle  realities. 
One  of  our  venerated  teachers,  the  illustrious  Rossi,  thought 
he  might  remove  the  difficulty  by  drawing  a  distinction  be- 
tween -piire  Political  Economy  and  afflied  Political  Economy. 
It  is  not  without  a  certain  amount  of  hesitation  that  we  dare 
differ  with  so  high  an  authority ;  but  confess  we  must,  this  dis- 
tinction is  far  from  satisfying  us.  The  doubt  it  has  left  in  our 
mind  has  been  the  principal  cause  which  has  inclined  us  to 
the  historical  method.  "Rational  Political  Economy,"  says 
Rossi,  "  is  the  science  which  investigates  the  nature,  the  causes 
and  the  movement  of  wealth,  by  basing  itself  on  the  general 
and  constant  facts  of  human  nature,  and  of  the  external  world. 
In  applied  Political  Economy,  the  science  is  taken  as  the  mean. 
Account  is  taken  of  external  facts.  Nationality,  time  and 
place  play  an  important  part." 

Let  us  for  a  moment  accept  these  definitions;  what  is  the 
consequence  ?  That  there  are  two  sciences,  the  one  of  which, 
purely  speculative,  has  more  to  do  with  philosophy  than  with 
the  permanent  conflicts  which  agitate  the  world;  the  other  of 
which  could  not  alone  furnish  us  with  rules  in  practice,  nor 
with  a  formular}"  for  the  measures  to  be  taken  in  a  given 
case,  since  such  a  pretension  would  be  both  vain  and  ridicu- 
lous, but  which  would  inform  the  practical  judgment  of  men 
charged  with  the  solution  of  the  numberless  difficult  and  com- 
plicated questions  which  come  up  every  day.  If  pure  science 
refuses  to  interfere  in  the  affairs  of  this  world ;  if,  as  the  learned 


ON  THE  HISTORICAL  METHOD.  35 

originator  of  the  doctrine  we  are  just  now  considering  gives 
us  to  understand,  it  would  compromise  the  solution  of  ques- 
tions by  the  intoxication  of  logic,  and  the  ambition  of  perfect 
S3^stem;  if,  consequently,  it  is  to  be  worshipped  like  a  mo- 
tionless and  inactive  divinit)^,  how  could  this  platonic  satisfac- 
tion suffice  us?  Would  not  the  opponents  of  economic  doc- 
trines be  disposed  to  acknowledge  all  the  principles,  provided 
the  consequences  to  be  drawn  from  them  were  left  to  them- 
selves; and  would  they  not  come  to  us,  bristling  with  argu- 
ments drawn  from  the  circumstances  of  nationality,  time  and 
space,  to  refute  the  possibility  of  applying  pure  science? 

On  ne  vaincra  jamais  les  Romains  que  dans  Rome. 

This,  therefore,  is  the  ground  we  must  explore.  We  must 
develop  applied  Political  Economy  which  takes  cognizance  of 
external  circumstances.  To  do  this,  no  one  will  question  that 
the  best  and  most  decisive  of  methods  is  the  historical,  which 
concerns  itself  with  time,  space  and  nationalit}-,  and  which 
leads  to  proper  reformation  where  reformation  is  wanted. 

Moreover,  principles  will  be  no  less  firmly  established  by 
historical  induction  than  by  dogmatic  deduction,  and,  more- 
over, science  will  be  inseparable  from  art.  We  are  not  of 
those  who  deny  principles,  or  who  challenge  them.  What 
we  desire  is,  that  they  should  not  be  worshiped  as  fetiches, 
but  that  they  should  enter  into  the  very  life-blood  of  nations. 

Further:  the  abstract  deductions  of  pure  science  do  not 
leave  us  without  disquietude,  since  they  treat  man  much  more 
like  a  material  than  like  a  moral  force.  Under  the  vigorous 
procedure  of  speculative  mathematics,  man  becomes  a  constant 
quantity  for  all  times  and  all  countries,  whereas  he  is,  in  real- 
ity, a  variable  quantity.  All  the  elements  put  in  play  are 
ideal  entities,  the  reverse  of  which  we  find  in  poetry,  where 

Tout  prcnd  un  corps,  una  ame,un  esprit,  un  visage! 

and  where  everything  loses  the  character  of  life,  and  is  trans- 
formed into  inanimate  units.     Man  is  something  different  from 


36  PRELIMINARY  ESSAY 

the  sum  of  the  services  he  maybe  made  to  render,  and  from 
the  sum  of  enjoyments  which  may  be  procured  for  him.  We 
must  not  run  the  risk  of  lowering  him  to  the  level  of  a  living 
tool;  and  from  the  moment  that  we  are  required  to  take  his 
moral  destiny  into  account,  what  becomes  of  abstract  calcula- 
tion? 

X. 

We  have  been  wrong,  says  Rossi,  in  reproaching  Quesnay 
for  his  famous  laisscz  faire,  laissez  -passer^  which  is  pure  sci- 
ence. We,  also,  are  of  opinion  that  the  reproach  was  ill 
founded,  for  it  proceeded  from  a  wrong  conception  of  the 
principle  itself  But  it  seems  to  us  that,  far  from  condemning 
this  doctrine  in  its  serious  application,  the  historical  method 
may  serve  to  explain  and  to  justify  it.  Employing  less  of 
rigidity  and  dryness  in  form,  it  reaches  consequences  more  in 
harmony  with  social  life.  But  it  is  not  to  be  imagined  that 
we  do  not  meet  in  this  way  with  many  ancient  and  glorious 
precedents.  The  great  principles  of  industrial  liberty,  as  well 
as  those  of  commercial  liberty,  originated  in  France.  For- 
bonnais  was  right  when  he  said:  "We  may  congratulate 
ourselves  on  being  able  to  find,  in  our  old  books  and  ancient 
ordinances,  wherewith  to  vindicate  for  ourselves  the  right  to 
that  light  which  we  generally  supposed  to  have  been  revealed 
to  the  English  and  Dutch  before  us."  The  further  Forbonnais 
carried  his  researches  into  our  annals,  the  greater  the  number 
of  traces  of  opposition  to  the  prejudices  in  favor  of  exclusion 
and  monopoly,  so  long  made  principles  of  administrative  pol- 
icy, did  he  find.^ 

The  famous  axiom,  laissez  f aire,  and  laissez  -passer^  the  sub- 
versive tendencies  of  which  people  affect  to  condemn,  was  not 
invented  by  Quesnay.  He  only  gave  a  scientific  bearing  to 
what  was  the  inspiration  of  a  merchant  called  Legendre. 
The  latter,  consulted  by  Colbert  on  the  best  means  of  pro- 

'  Recherches  sur  les  Finances  de  France. 


ON  THE  HISTORICAL  METHOD.  37 

tecting  commerce,  dropped  these  words  which  have  since  be- 
come so  celebrated. 

We  must  not  lose  sioht  of  their  real  meaning^  nor  misun- 
derstand  the  intention  which  dictated  them.  What  Quesnay 
said  was  this:  "Let  everything  alone  which  is  injurious, 
neither  to  good  morals,  nor  to  liberty,  nor  to  property,  nor  to 
personal  security.  Allow  everything  to  be  sold  which  has 
been  produced  without  crime."  And  he  added :  "  Only  free- 
dom judges  aright ;  only  competition  never  sells  too  dear,  and 
always  pays  a  reasonable  and  legitimate  price."  Far  from 
being  the  absence  of  rule,  liberty  is  the  rule  itself.  To  laisser 
fairc  the  good  is  to  prevent  evil.^ 

There  is  need  of  institutions  to  complete  the  exercise  of  the 
independence  acquired  by  labor,  and  of  laws  to  regulate  that 
exercise.  The  laisser f aire  and  laisser  fasser  of  economists  is, 
in  no  way,  like  the  absolute  formula,  which  some  have  de- 
nounced and  others  sought  to  utilize,  as  relieving  authority  of 
all  care  and  all  intervention. 

To  understand  this  maxim  aright,  we  must  go  back  to  the 
oppressive  regime  of  ancient  society.  Quesnay's  formula  was, 
first  of  all,  a  protest  against  the  restraints  which  hampered  the 
free  development  of  labor.  But  it  did  not  tend  to  abrogate 
the  office  of  legislator,  nor  to  deprive  society  or  the  individual 
of  the  support  of  the  public  power  which  watches  over  the 
fulfillment  of  our  destiny. 

It  may  have  seemed  convenient  to  find  in  the  gravity  of  a 
politico-economical  principle,  an  excuse  for  the  sweets  of  legis- 
lative and  administrative_/?7r  niente^  but  it  is  generally  conceded 
that  the  role  of  authority  has  grown,  rather  than  diminished, 
under  the  regime  of  the  liberty  of  labor.  The  task  is,  in  our 
days,  a  hard  one,  both  for  individuals  and  nations;  for  liberty 
dispenses  its  favors  only  to  the  masculine  virtues  of  a  labori- 
ous and  an  enlightened  people. 

Liberty  is  not  license.     It  refuses  to  bend  under  the  yoke, 

FrdiUric  Passy,  de  la  Contrainte  et  de  la  Libert^. 


38  PRELIMINARY  ESSAY 

but  it  submits  to  rule.  The  mission  of  authority  is  not  to  con- 
strain, but  to  counsel;  not  to  command,  but  to  help  accom- 
plish ;  not  to  absorb  individual  activity,  but  to  develop  it.  It 
does  not  pretend  to  raise  a  convenient  .indifference  on  the  part 
of  government,  nor  the  indolent  withdrawal  of  all  protective 
influence  to  the  dignity  of  a  principle.  To  say,  on  the  other 
hand,  that  the  laisser  fairc  and  laisser  passer  of  the  economists 
means:  Let  robbery  alone;  let  fraud  alone  etc.,  is  to  amuse 
one's  self  playing  upon  words,  and  to  argue  in  a  manner  un- 
worthy of  any  serious  answer.  Under  pretext  of  painting  a 
picture  of  economic  doctrine,  we  are  given  its  caricature. 
Such  has  never  been  the  system,  to  the  elaboration  of  which 
the  purest  hearts  and  noblest  intellects  have  devoted  them- 
selves. A  negation  does  not  constitute  the  science  of  Political 
Economy. 

It  is  very  convenient  to  inclose  humanity  within  a  circle  of 
action,  drawn  with  rigorous  precision,  and  to  govern  move- 
ments seen  in  advance.  But  such  artificial  conceptions  muti- 
late the  activity  of  man.  To  guaranty  man  all  liberty,  and 
prevent  its  abuse  —  such  are  the  data  of  the  problem.  The 
work  is  a  great  and  difficult  one.  Far  from  yielding  in  point 
of  elevation  to  ideal  systems,  it  is  superior  to  them  in  extent 
and  variety  of  combinations.  Those  who  ignore  its  bearing, 
yield,  it  may  be,  to  a  certain  indolence  of  intellect.  Restrained 
within  its  natural  limits,  the  famous  laisser  fair e  and  laisser 
■passer  of  the  Physiocrates  deserves  even  to-day  our  respect 
and  our  confidence.  It  ought  to  be  preserved  in  the  grateful 
memory  of  men,  side  by  side  with  the  maxim  which  Quesnay 
succeeded  in  having  printed  at  Versailles,  by  the  hand  of 
Louis  XV  himself:  "Pauvres  paysans,  pauvre  ro3^aume; 
pauvre  royaume,  pauvre  souverain."  ^ 

'  Poor  peasantry,  poor  kingdom;  poor  kingdom,  poor  sovereign. 


ON  THE  HISTORICAL  METHOD.  39 

XL 

To  return  to  the  question  of  method.  Rossi  made  use  of 
an  ingenious  example  to  explain  his  thought:^  "Are,"  he  in- 
quires, "  these  deductions  [of  pure  science]  perfectly  legitimate ; 
are  these  consequences  always  true?  It  is  incontestably  true 
that  a  projectile,  discharged  at  a  certain  angle,  will  describe  a 
certain  curve;  this  is  a  mathematical  truth.  It  is  equally  true, 
that  the  resistance  offered  to  the  projectile  by  the  medium 
through  which  it  moves  modifies  the  speculative  result  in 
practice,  to  some  extent;  this  is  a  truth  of  observation.  Is  the 
mathematical  deduction  false?  By  no  means;  but  it  supposes 
a  vacuum.  I  hasten  to  acknowledge  it.  Speculative  economy 
also  neglects  certain  facts  and  leaves  certain  resistances  out  of 
account."  Now,  from  the  moment  that  we  have  to  deal  with 
human  interests,  it  is  not  possible  to  suppose  a  vacuum,  to 
neglect  the  most  vulgar  facts,  and  the  most  common  instances 
of  resistance,  nor  to  lose  one's  self  in  abstraction.  The  correct- 
ives of  applied  Political  Economy  either  may  not  wipe  out  this 
original  sin,  or  else  they  run  great  danger  of  covering  up  the 
principles  themselves.  In  balistics,  again,  we  may  measure 
the  resistance  which  the  medium  in  which  we  are  obliffed 
to  operate,  makes  the  force  of  impulsion  and  the  target  both 
obey  the  same  law,  and  yield  to  the  same  process  of  calcula- 
tion. But  is  it  thus  when  3"ou  touch  upon  man's  innermost 
and  most  sensitive  part  ?  Is  there  not  danger  that  the  hypoth- 
eses may  be  deceitful,  and  that  you  may  be  accused  of  toiling 
in  a  vacuum?  We  well  know  the  solid  reason  that  may  be 
opposed  to  sarcasm  of  this  nature;  but  is  it  expedient  to  lay 
one's  self  open  to  it? 

Moreover,  the  consequences  are  not  great  enough  to  war- 
rant us  to  expose  ourselves  to  the  danger.  The  principles  of 
pure  science  are  very  small  in  number.  They  might  even,  be 
easily  reduced  to  one,  of  which  M.  Cousin  has  been  the  elo- 

*  Cours  d'  Econ.  polit.,  2e.,  Lc9on,  I,  p.  33. 


40  PRELIMINARY  ESSAY 

quent  interpreter  —  human  libert3^  This  liberty  has  no  need 
of  Political  Economy  to  shine  with  the  luster  of  evidence; 
nothing  can  prevail  against  it.  "We  can  prove  that  it  is  as 
fecund  as  it  is  respectable;  but  if  the  science  of  wealth  should 
endeavor  to  demonstrate  the  contrary,  the  primordial  bases 
of  societ}^,  libert}^,  property  and  the  family  would  not  be  less 
sacred  nor  less  necessar}^,  for  they  are  the  right  of  humanity. 
They  could  not  be  put  aside,  even  under  pretext  of  any  mech- 
anism which  would  claim  to  produce  more.^  These  sovereign 
principles  of  economy  flow  from  the  moral  law,  and  they  have 
no  reason  to  dread  the  power  of  facts,  for  the  prosperity  of  na- 
tions depends  on  the  respect  with  which  they  are  surrounded 
and  the  guaranties  by  which  they  are  protected. 

We  have  spoken  of  the  moral  law ;  and,  indeed,  in  our  opin- 
ion, it  is  impossible  to  banish  it  from  the  domain  of  public 
economy.  Any  other  point  of  view  seems  to  us  too  narrow. 
And  when  we  see  eminent  men  go  astray  in  the  pursuit  of  an 
ideal  which  fails  to  take  the  human  soul  into  account,  and 
which  finds  nothing  but  equations  where  there  are  feelings  and 
ideas,  we  cannot  help  thinking  that  they  are  unfaithful  to  the 
thought  of  the  founder  of  the  science,  Adam  Smith.  Man  is 
not  simply  a  piece  of  machinery.  He  does  not  blindly  submit 
to  external  impulse.  Rather  is  he  himself,  the  greatest  of  im- 
pulses. But  to  govern  things,  he  must  first  learn  to  conquer 
himself  Personal  interest  is  the  powerful  motive  which  he 
obeys.  Man  does  not  live  alone,  in  a  state  of  isolation,  in  the 
world.  VcB  soli!  He  lives  in  society  and  profits  by  the  rela- 
tions which  he  forms  with  other  beings,  intelligent  like  him- 
self, and  for  whom  he  has  a  natural  feeling  of  sympathy. 

The  good  that  comes  to  them  yields  satisfaction  to  him,  and 
the  evil  that  befalls  them  falls  on  him  likewise.  He  cannot  turn 
back  entirely  upon  his  own  personality.  Besides  his  own  in- 
terest, he  feels  and  shares  another  interest  —  the  interest  of  all. 
Personal  interest  is  perfectly  legitimate.     The  love  of  self  can- 

'  This  would  be :  Propter  vitiam,  vitae  perdere  causas. 


ON  THE  HISTORICAL  METHOD.  41 

not  be  condemned.  The  Savior  himself  has  enjoined  us  to  love 
our  neighbor  as  ourselves.  To  love  him  more  than  ourselves 
is  a  very  high  and  beautiful  virtue.  It  is  the  self-abnegation 
which  inspired  Christian  heroes.  But  heroism  is  rare,  and  can- 
not be  imposed,  nor  taken,  as  a  rule.  Personal  interest  is  a 
powerful  stimulant,  and  the  superior  harmony  of  social  rela^ 
tions  makes  it  contribute  to  the  general  good. 

What  must  be  condemned  is  a  fatal  deviation  of  this  senti- 
ment which  destroys  its  effect  and  narrows  its  actions.  What 
we  need  to  prevent  is  the  degeneration  of  personal  interest  in- 
to an  egotism  which  parches,  instead  of  fertilizing,  and  which 
compromises  the  future  by  the  exclusive  search  after  present 
advantage;  for  egotism  is  short-sighted.  On  the  other  hand, 
the  broader  and  more  p^enerous  feelinc:  which  inclines  us  to 
sympathize  with  our  fellow  beings  in  their  sorrows,  and  to 
unite  our  destiny  to  theirs ;  that  is,  the  feeling  of  the  general 
interest,  has  a  limit  too. 

It  would  be  falsified  if  it  absorbed  the  individual;  if  it  des- 
troyed the  most  powerful  motive-force  by  drying  up  the  abund- 
ant source  of  activity ;  if  it  attacked  moral  energy  by  enervat- 
ing responsibility ;  if  it  extended  the  circle  of  results  obtained 
to  such  an  extent  that  scarcely  any  one  should  feel  the  rebound. 

The  evil  produced  by  egotism,  that  sad  travesty  of  personal 
interest,  appears  under  a  form  quite  as  formidable  when  the 
general  interest  takes  the  form  of  communism.  The  cooper- 
ation of  personal  interest  and  of  the  general  interest  is  always 
necessar}'-,  both  for  individual  profit  and  social  advantage. 
There  is  as  much  danger  in  annihilating  the  individual  as  in 
exalting  him.  History  furnishes  us  with  memorable  examples 
of  this.  It  does  not  allow  us  to  go  astray  in  the  narrow  ways 
of  a  peevish  and  jealous  personality,  nor  to  lose  ourselves  in 
the  vague  labyrinth  of  a  chimerical  and  false  communism. 
The  latter  would  destroy  what  constitutes  the  power  and  dig- 
nity of  man.  It  would  wipe  out  the  most  prominent  features 
of  his  noble  nature,  by  destroying  the  support  of  energy  and 
activity  and  the  food  of  moral  force. 


42  PRELIMINARY  ESSAY 


XII. 


But,  we  are  told,  Political  Economy  is  only  the  science  of 
selfishness ;  Adam  Smith  is  the  prophet  of  individualism ;  grow 
rich  -per  fas  et  nefas  is  its  ultimate  teaching.  Such  a  judg- 
ment is  evidence  of  much  levity  and  little  enlightenment. 
How  could  the  man  who  conceived  the  study  of  human  in- 
terests on  so  large  a  scale,  the  philosopher  who  acknowledged 
Hutcheson  as  his  master  and  gave  his  ideas  a  still  more  ex- 
pansive character,  be  the  apostle  of  egotism ;  and  how  can  the 
science  which  he  founded  be  its  gospel?  There  is  here  an 
error  of  fact  and  a  defect  of  appreciation.  Hutcheson  had 
based  moral  philosophy  on  the  feeling  which,  according  to 
him,  engendered  all  the  other  virtues,  on  benevolence,  which 
is  disinterested,  busied  with  the  welfare  of  others,  with  the 
public  weal  and  the  general  interest.  Adam  Smith  went  fur- 
ther, and  sought  to  base  it  on  a  still  more  energetic  feeling, 
on  sympathy. 

The  first  sentence  of  his  Theory  of  the  Moral  Sentiments, 
which  is  a  full  resume'  of  his  theory,  is  as  follows:  "How 
selfish  soever  man  may  be  supposed,  there  are  evidently  some 
principles  in  his  nature  which  interest  him  in  the  fortune  of 
others,  and  render  their  happiness  necessary  to  him,  though 
he  derives  nothing  from  it,  except  the  pleasure  of  seeing  it." 
And  this  is  no  empty  declaration  on  his  part.  It  is  the  thought 
which  of  all  in  his  book  is  nearest  to  his  heart ;  and  hence  he 
energetically  assails  those  philosophers  who  look  upon  self- 
love  and  the  refinements  of  self-love  as  the  universal  cause  of 
aU  our  sentiments,  and  seek  to  explain  sympathy  by  self-love. 

La  Rochefoucauld,  Mandeville  and  Helvetius  never  met 
with  a  more  determined  or  energetic  adversary.  Nowhere 
have  the  sweet  and  amiable  virtues,  such  as  ingenuous  conde 
scension,  indulgent  humanity,  and  the  respectable  and  severe 
virtues,  such  as  disinterestedness  and  self-control  which  sub- 
ject our  movements  to  the  requirements  of  the  dignit}^  of  ouf 


ON  THE  HISTORICAL  METHOD.  43 

nature,  been  better  understood  or  interpreted.  "  Adam  Smith 
is  the  philosopher  of  sympathy.^  His  theory  triumphs  over 
the  cowardly  and  shameful  egotism  which  concentrates  the 
moral  life  of  the  individual  in  himself,  and  separates  it  from 
the  life  of  the  human  race  of  the  outre  stoicism  which  refuses 
the  aid  of  sentiment  to  reason."  '^  According  to  him,  the  law 
of  private  morals  is  sympathy;  the  law  of  natural  jurispru- 
dence, justice ;  the  law  of  the  production  of  wealth,  free  labor. 
But  while  he  defended  this  principle  with  energy,  he  did  not 
become  guilty  of  a  real  recantation  by  worshiping  the  idol  he 
had  just  overthrown.  He  would  have  been  culpable  of  the 
strangest  of  all  contradictions  if  he  had  made  the  vice  which 
he  had  just  lacerated  the  very  pivot  of  another  part  of  his 
teaching. 

We  regret  that  this  essay,  which  has  already  very  much 
exceeded  the  limits  we  assigned  it  in  the  beginning,  will  not 
permit  us  to  reproduce  here  Knies'  beautiful  demonstration,  in 
which  he  so  learnedl}^  and  eloquently  vindicates  Adam  Smith 
from  this  strange  imputation,  thereby  placing  Political  Econ- 
omy on  its  true  basis,  the  basis  of  morals,  by  removing  in  a 
decisive  way,  all  pretext  of  error  and  all  means  of  subterfuge. 
This  part  is  one  of  the  best  features  in  his  most  excellent  work 
on  "  Political  Economy,  from  the  historical  Point  of  View." 
We  shall  return  to  this  matter. 


XIII. 

What  is  there  that  political  economists  have  not  been  charged 
with?  They  have  been  accused,  above  all,  of  a  cold  hearted- 
ness  and  cruelty,  and  the  sentence  passed  on  them  has  been 
resumed  in  these  words:  "  Political  Economy  has  no  bowels!" 
Indeed,  the  representative  of  the  science,  who  has  been  most 
attacked  and  who  has  been  held  up  as  a  picture  of  impassible 
insensibility ;  on  whom  have  been  heaped  the  most  bloody  out- 

'  Cousin,  loc.  cit,  p.  276.  '^  Ibid.,  214. 


44  PRELIMINARY  ESSAY 

rages,  is  Malthus.  Let  us  hear  him.  He  tells  us  in  his  work 
on  Political  Economy,  that  if  a  country  had  no  other  means 
to  grow  rich,  except  by  seeking  for  success  in  the  struggle 
with  other  countries,  at  the  cost  of  a  reduction  of  the  wages  of 
labor,  he  would  unhesitatingly  say:  Away  with  such  riches; 
that  it  is  much  to  be  desired  that  the  working  classes  should 
be  well  remunerated,  and  this  for  a  reason  much  more  import- 
ant than  all  the  considerations  relating  to  wealth ;  that  is,  the 
happiness  of  the  great  mass  of  society.  And  he  goes  on  to 
say,  that  he  knows  nothing  more  detestable  than  the  idea  of 
knowingly  condemning  the  laboring  classes  to  cover  them- 
selves with  rags,  to  lodge  in  wretched  huts,  to  enable  us  to 
sell  a  few  more  stuffs  and  calicoes  to  foreign  countries.  Cer- 
tain it  is,  that  no  defender,  however  determined,  of  the  laboring 
classes,  has  said  anything  stronger  or  more  deeply  felt.  The 
reason  is,  that  nothing  was  more  foreign  to  Malthus'  ideas 
than  the  systematic  rigidity  of  mathematical  theories  of  wealth; 
that,  a  minister  of  the  Gospel,  he  had  meditated  on  its  high 
precepts.  His  whole  doctrine  is  based  on  the  moral  idea. 
"  He  was  profoundly  convinced  that  there  are  principles  in 
Political  Economy  which  are  true  only  in  as  far  as  they  are 
restricted  within  certain  limits.  He  saw  the  principal  diffi- 
culty of  the  science  in  the  frequent  combination  of  complicated 
causes,  in  the  action  and  reaction  of  causes  on  one  another, 
and  in  the  necessity  of  setting  limits  or  making  exceptions  to  a 
great  number  of  important  propositions."  ^  Here  we  are  ever 
brought  back  to  the  undulating  ground  of  living  science,  instead 
of  having  to  follow  the  rectilineal  way  traced  out  b}^  the  dead 
letter.  We  are  always  driven  back,  whatever  may  be  pre- 
tended to  the  contrary,  to  the  realities  of  which  history  alone 
possesses  the  secret.  The  idea  of  wealth  cannot  absorb  every- 
thing when  there  is  question  of  judging  and  enlightening  men. 
To  do  this,  it  is  necessary  to  know  the  various  phases  of  social 
housekeeping,  what  nations  have  thought  of  economic  interests 

'  Ch.  Comte,  Notice  tur  Malthus,  XXVII. 


ON  THE  HISTORICAL  METHOD.  45 

which  have  never  ceased  to  interest  them  greatl}^,  what  they 
have  attempted  and  what  they  have  attained. 

Hence,  we  must  turn  over  the  leaves  of  the  book  of  the  past, 
and  study  its  economic  aspect,  as  we  have  studied  its  political 
and  literary  aspect.  We  must  follow  living  nations  through 
their  divers  periods  of  development,  and  fathom  the  causes  of 
the  destruction  of  those  that  are  dead.  When  we  are  dealing 
with  the  comparative  study  of  the  economic  destinies  of  na- 
tions, our  investigations  are  limited  to  a  small  number  of  indi- 
vidual nations  —  a  further  reason  not  to  omit  any,  and  above 
all,  to  scrutinize,  as  an  anatomist  would  with  his  scalpel,  the 
principle  of  life  of  those  which  are  no  more.  We  may,  by 
accounting  to  om^selves  for  the  immense  variety  of  phenomena 
which  are  brought  to  light  by  the  application  of  principles  to 
facts,  and  in  which  nothing  is  absolute  or  permanent,  in  which, 
on  the  contrary,  everything  is  relative  and  successive,  acquire 
that  sureness  of  touch  and  correctness  of  vision  which  are 
among  the  most  valuable  conquests  of  science. 

It  would  be  a  mistake  to  suppose  that  theory  simplifies  prac- 
tical solutions.  Far  from  providing  us  with  a  sort  of  formu- 
lary, it  teaches  us  to  put  our  finger  on  a  number  of  difficulties. 
It  brings  to  the  surface  the  many  aspects  and  fertile  and  varied 
considerations,  the  examination  of  which  is  the  mission  of  the 
real  statesman  and  legislator.  In  this  way,  the  action  of  thought 
and  the  power  of  the  moral  idea  are  revealed  with  most  eclat. 
Man  ceases  to  be  an  inert  element,  and  manifests  himself  as  a 
sensible  being,  and  the  sublime  thought  of  Pascal:  "  Human- 
ity is  like  one  man  who  lives  and  learns  always,"  is  verified  by 
the  result.  The  wish  to  violently  abdicate  the  past,  it  would 
be  vain  and  rash  to  attempt  to  realize.  The  lessons  it  trans- 
mits to  us  are  as  instructive  as  the  picture  it  unrolls  before  our 
eyes  is  attractive.  We  have  no  longer  but  to  see  and  hear,  to 
be  cured  of  the  most  generous  impatience  with  what  is,  and  to 
retreat  from  the  most  perilous  attempts. 


46  PRELIMINARY  ESSAY 


XIV. 


The  unvarying  testimony  of  ages  affirms  the  continued  and 
gradual  amelioration  of  man  by  individual  energy  and  moral 
thouiiht.^  Want  and  suflerin^  have  urcjed  him  forward. 
Foresight,  labor,  sacrifice  and  virtue  have  in  part  redeemed 
him.  No  right  has  been  lessened  or  usurped,  and  every  step 
in  civilization  has  been  a  step  in  the  way  of  freedom.  Instead 
of  making  the  latter  responsible  for  a  material  and  moral 
wretchedness  which  it  is  called  upon  to  cure,  we  may  prove, 
that,  in  proportion  as  real  liberty  and  legal  guaranties  increase, 
evil  diminishes. 

We  do  not  desire  to  yield  to  a  convenient  optimism,  and  de- 
ny the  sufferings  which  weigh  only  too  heavily  on  the  world. 
We  are  far  from  having  reached  the  end  assigned  to  our  ef- 
forts ;  but  let  not  the  hope  we  entertain  of  further  progress  blind 
us  to  that  which  has  already  been  accomplished.  This  latter 
shows  us  that  we  are  on  the  right  road,  and  that  we  have  not 
done  unwisely  in  giving  free  rein  to  the  human  faculties. 
Sudden  changes  are  made  only  in  theaters.  In  the  real  world, 
the  march  of  progress  is  slow  and  laborious.  It  may  be  ac- 
celerated by  a  happy  hit ;  but  it  would  be  vain  to  try  to  hurry  it. 

Man  still  suffers.  No  one  desires  to  deny  the  evil,  but  only 
to  estimate  its  extent.  Yet  it  cannot  be  gainsaid  that  its  fatal 
empire  is  narrowing  instead  of  enlarging.  Especially  is  it  the 
progress  accomplished  in  the  higher  regions  of  intellect  and  of 
the  feelings  which  here  exerts  its  beneficent  influence.  On 
our  moral  greatness  depends  our  material  power.  The  eleva- 
tion or  debasement  of  character,  the  energy  or  debility  of 
the  will  —  such  is  the  first  source  of  good  or  evil.  The  world, 
a  Chalmers  rightly  says,  is  so  constituted  that  we  should  be 
materially  happy  if  we  were  morally  good. 

Industrial  progress  helps,  we  have  said,  towards  moral  per- 
fection.    It  is  not  the  source  of  that  perfection,  but  its  instru- 

'  FriiUric  Passy:  De  la  Contrainte  et  de  la  Liberte. 


ON  THE  HISTORICAL  METHOD.  47 

mcnt;  for  ignorance  and  misery,  its  habitual  attendants,  are 
poor  advisers.  Political  Economy  shows  how  the  goods  of 
this  W' orld  are  multiplied.  It  shows  how  modest  comfort  may 
become  more  and  more  general,  and  thus  an  impetus  be  given 
to  all  noble  virtues  without  awakening  a  blind  passion  for  riches. 
It  teaches  moderation  instead  of  exxiting  covetousness,  nor 
does  it  come  in  conflict  with  the  sublime  words  of  Saint  Augus- 
tine :  "  The  family  of  men,  living  by  faith,  use  the  goods  of  the 
earth  as  strangers  here,  not  to  be  captivated  by  them  or  turned 
away  by  them  from  the  goal  to  which  they  tend,  which  is  God, 
but  to  find  in  them  a  support  which,  far  from  aggravating, 
lightens  the  burthen  of  this  perishable  body  which  weighs 
down  the  soul." 


XV. 

Looked  at  from  below,  all  things  diverge.  Looked  at  from 
above,  all  things  run  into  one  another  and  combine  with  one 
another.  It  is  one  of  the  great  merits  of  the  historical  method, 
that  it  raises  the  point  of  observation  and  gives  the  observer 
the  support  of  tradition  and  good  sense,  that  master  of  life; 
that  it  prevents  a  divorce  between  different  branches  of  knowl- 
edge of  the  same  order,  whicli  constitute  but  one  intellectual 
family,  which  there  is  no  question  of  confounding,  and  which 
it  would  be  dangerous  to  isolate. 

Aristotle,  that  universal  genius,  had  discovered  Political 
Economy,  and  it  was  the  historical  method  which  revealed  it  to 
him.  Be  it  added,  that  the  great  philosopher  had  seen  but 
one  phase  of  the  science,  chrematistics,  and  that  his  ideas  here 
bear  the  impress  of  the  age  in  which  he  lived.  Aristotle, 
however,  distinguished  this  science  from  all  others  and  from 
domestic  economy,  which  is  so  akin  to  it.  Doubtless,  he  did 
not  found  the  modern  study  of  Political  Economy,  but  his 
powerful  intellect  gave  him  a  presentiment  of  it. 

The  honor  of  producing  at  once,  Adam  Smith,  Quesnay  and 
Turgot  belongs  to  the  eighteenth  century.      It  was  in  the 


48  PRELIMINARY  ESSAY. 

course  of  philosophy  at  Glasgow  that  this  study  found  a  defi- 
nite place.  The  illustrious  founder  of  the  science  of  Political 
Economy  did  not  contemplate  dissolving  the  ancient  alliance 
between  it  and  the  moral  sciences,  history,  philosophy,  juris- 
prudence, belles-lettres  —  all  of  which  he  had  explored  and 
studied  profoundly.  Let  those  whose  ambition  it  is  to  walk, 
even  at  a  distance,  in  the  footsteps  of  Adam  Smith,  not  forget 
what  was  the  cradle  of  the  noble  study  to  which  they  have 
devoted  their  intellects. 

L.  WOLOWSKI. 


THE 

PRINCIPLES  OF  POLITICAL  ECONOMY. 


INTRODUCTION 


FUNDAMENTAL  PRINCIPLES. 


INTEODUCTIOK 


CHAPTER  I. 

FUNDAMENTAL  IDEAS. 


SECTION  I. 

GOODS— WANTS. 


The  starting  point,  as  well  as  the  object-point  of  our  science 
is  Man,^ 

Every  man  has  numberless  wants,  physical  and  intellectual.''  * 
Wants  are  either  necessaries,  decencies  (Anstandsbedurfmss,c) 
or  luxuries.  The  non-satisfaction  of  necessary  wants  causes 
disease  or  death;  that  of  the  wants  of  decency  endangers  one's 

'  Schaffie,  Deutsche  Vierteljahrsschrift  (iS6i),  emphasizes  this.  Adam 
Smith,  Wealth  of  Nations  (1776),  very  characteristicallj,  begins  with  the 
yearly  labor  of  the  nation;  y.  B.  Say  (Traite  d'  Economie  Politique,  1802), 
with  richesses;  Ricardo  (Principles  of  Political  Economy  and  Taxation,  1817), 
with  the  idea  of  value. 

'  The  sum  total  of  the  wants  {Bedarf)  of  the  Bavarian  people,  for  a  whole 
year,  is  estimated  by  Hermann,  Staatswirthschaftliche  Untersuchungen  (2d 
ed.,  1S70,  p.  Si),  at  177,000,000  florins  for  food  (77  millions  for  wheat  and  po- 
tatoes, 69  millions  for  meat,  15  millions  for  milk  etc.,  16  millions  for  eggs, 
vegetables,  salt  and  spices);  50  millions  for  clothing,  45  millions  for  shelter, 
37.5  millions  for  fuel,  60  millions  for  beverages. 

*The  original  adds:  deren  Gesammtheit  sein  Bedarf  heisst ;  the  aggregate 
of  which  is  called  his  [man's]  Requisite  {Bedarf).  There  being  no  exact 
equivalent  in  English  for  the  Avord  Bedarf  m.  this  connection,  this  note  is  ap- 
pended. —  Translator. 


52  INTRODUCTION.  [Ch.  I. 

social  position.^  The  much  greater  number,  and  the  longer 
continuance  of  his  wants  are  among  the  most  striking  dif- 
ferences between  man  and  the  brute:*  wants  such  as  clothing, 
fuel,^  tools,  and  those  resulting  from  his  much  longer  period 
of  infancy;  which  last,  together  with  other  causes,  has  con- 
tributed so  largely  to  make  marriage  necessary  and  universal. 
While  the  lower  animals  have  no  wants,  but  necessities,  and 
w^hile  their  aggregate-want,  even  in  the  longest  series  of 
generations,  admits  of  no  qualitative  increase,  the  circle  of 
man's  wants  is  susceptible  of  indefinite  extension.^  And, 
indeed,  every  advance  in  culture  made  by  man  finds  €;;^pres- 
sion  in  an  increase  in  the  number  and  in  the  keenness  of  his 
rational  wants.  No  man  who  distinguishes  himself  in  an}^- 
thing,  but  feels  spurred  thereto  by  a  peculiar  want ;  and  this 
want  is  both  the  cause  and  the  effect  of  the  power  which  is 
peculiar  to  him.  No  one  but  the  poet  feels  the  want  of  poet- 
izing; no  one  but  the  philosopher,  of  philosophizing.  In 
every  particular,  intellectual  or  physical,  in  which  the  man  is 
in  advance  of  the  child,  he  experiences  new  wants  unknown 
to  the  child.  Our  education  consists,  for  the  most  part,  in 
awakening  wants  and  providing  for  their  satisfaction. 

2  According  to  Boi-sguillebert  (ob.  1714)  Traits  des  Grains,  I.,  c.  4,  the  wants 
necessaire,  commode,  ddlicat,  superjlic,  magnifiqne,  arise  in  successive  order  with 
increasing  welfare  or  prosperity,  and  are  surrendered  in  a  reverse  order,  witli 
increasing  need.  Tucker  distinguishes  necessaries,  comforts,  and  conveni- 
ences of  the  respective  conditions,  elegancies  and  refinements,  and  lastly, 
"grand  and  magnificent."  (Two  Sermons,  1774,  29  ff.);  F.  B.  W.  Hermann, 
loc.  cit.,  ist,  ed.,  1S32,  68;  necessary  goods  (Giiter  der  Nothdurft),  goods  that 
contribute  to  pleasure  and  recuperation,  to  culture  and  splendor. 

^Compare  Tucker,  On  the  Naturalization  Bill  (1751  seq.),  IV,  note. 

5  No  people  without  fire  (Prometheus !) ;  and  it  seems  that  broiling  was  the 
earliest  mode  of  preparing  food;  then  followed  baking  in  heated  cavities, 
and  lastly  came  boiling  in  vessels.  {KIcmm,  Allgemeine  Kulturgeschichte,  I, 
180,  343.) 

s  There  is  an  interesting  attempt  by  Fauchcr,  in  the  Vierteljahrsschrift 
fur  Volkswirthschaft  und  Kulturgeschichte,  1S6S,  III,  148  ff.,  to  determine  the 
relative  place  of  our  various  wants  according  to  their  capacity  for  extension  or 
contraction. 


Sec.  I.]  GOODS  — WANTS.  53 

Goods  arc  anything  which  can  be  used,  whether  directly  or 
indirectly,  for  the  satisfaction  of  any  true"  or  legitimate  human 
want,^  and  whose  utility,  for  this  purpose,  is  recognized. 
Hence,  the  idea  goods  is  an  essentially  relative  one.  Every 
change  in  man's  wants,  or  knowledge,  is  accompanied  by  a 
rapid,  corresponding  change,  either  in  the  limits  of  the  circle  * 
of  goods,  or  in  their  relative  importance.  Thus,  the  tobacco  plant 
has,  probably,  existed  thousands  of  3'ears.  It  became  goods, 
however,  only  from  the  time  that  man  recognized  its  use  for 
smoking,  snuffing,  etc.,  and  experienced  the  want  of  it  for  these 
purposes.  In  a  similar  way,  the  limestone  of  the  Solenhofen 
quarries  has  become  goods,  of  considerable  importance,  only 
since  the  invention  of  lithography ;  decaying  bones,  only  since 
that  of  bone-dust  manure;  caoutchouc  since  about  1825,  and 
gutta-percha,  only  since  1844.  On  the  other  hand,  charms,^" 
philters,  and  even  rehcs,  since  the  decay  of  faith  in  their  efH- 
cacy,  have  lost  the  quality  of  goods.  If  the  aggregate  in- 
come of  all  mankind  were,  by  some  sudden  revolution,  to  be 
equally   divided   among   all,    diamonds,   for   instance,  would 

''  The  qualification  "  true,"  excludes  from  the  circle  of  goods,  not  only  all 
those  things  which  might  satisfy  only  irrational  or  immoral  wants  (compare 
MiscJilcr,  Grundsatze  der  Nationalokonomie,  1S56,  I,  1S7),  but  also  vindicates 
the  fundamental  idea  of  the  whole  system  of  Political  Economy,  as  a  subject 
of  moral  as  well  as  of  psychological  investigation. 

8  Even  Aristotle  (Eth.  nicom.  V,  S),  considers  that  all  things  intended  to 
enter  into  commerce,  should  be  susceptible  of  comparison  with  one  another, 
and  that  the  measure  of  this  comparison  is  ■want,  which  is  the  foundation 
of  all  association  among  men. 

'  An  Arab  helped  pillage  a  caravan,  and  carried  away,  as  his  share  of  the 
boot}',  a  chest  of  pearls.  He  thought  it  a  box  of  rice,  and  gave  them  to  his  wife 
to  cook,  but  finding  they  did  not  boil  tender,  he  threw  them  away.  (Niebiikr, 
Beschreibung  von  Arabien,  3S3).  See  a  similar  anecdote  in  Ammian.  Mar- 
cell,  XXII.     Compare  Strabo,  VIII,  381. 

't^  As  soon  as  the  Persians  renounce  the  superstition  thai  the  daily  contem- 
plation of  a  turquoise  is  a  talisman  against  the  "evil  eye"  {K.  Ritter,  Erd- 
kunde,  VIII,  327),  that  precious  stone  will  lose  much  of  its  value.  On  the 
other  hand,  the  amulets  of  antiquitv,  although  they  have  long  lost  the  qual- 
ity of  goods  as  objects  of  superstition,  have  now  a  real  value  for  the  arch«- 
ologist. 


54:  INTRODUCTION.  [Ch.  I. 

greatly  decline  in  value,  for  the  reason  that  it  is  dependent,  in 
great  part,  on  the  wants  generated  by  vanity,  or  by  the  desire 
of  outshining  others.  Beer,  tobacco  etc.,  would  rise  in  the 
scale  as  goods,  because  the  circle  of  those  to  whose  wants 
they  minister  would  have  been  very  greatly  extended.  On 
the  whole,  advancement  in  civilization  has  uniformly  the  effect, 
of  itself,  to  increase  the  quantity  and  number  of  goods,  the 
wants  and  knowledge  of  men  being  thereby  increased.  We 
should  reach  the  ideal  here,  if  all  men  experienced  only  true 
or  legitimate  wants,  but  these  completely;  if  they  could  see 
their  way,  clearly,  to  the  satisfaction  of  them,  and  find  the 
means  of  satisfying  them  with  just  the  amount  of  effort  most 
conducive  to  their  physico-intellectuai  development.^^ 

SECTION  11. 

GOODS.  — ECONOMIC  GOODS. 

By  economy  (  Wtrf/isc/ia/i( =h.usbRndry  or  housekeeping),  we 
mean  the  systematized  activity  of  man,  to  satisfy  his  need 
{Beda?y=  requisite)  of  external  goods.-^  This  treatise  is  con- 
cerned only  with  economic  goods  (ends  or  means  of  econo- 
my).^    The  greater  the  advance  of  civilization  or  human  cul- 

^'  Since  observation  sliows,  that,  as  time  runs  on,  matter  tends  more  and 
more  to  become  goods,  the  bhnd  forms  of  motion  in  nature  to  become  useful 
labor  and  useful  sustenance,  impersonal  and  objectless  existence  to  be  trans- 
formed into  personal  property  and  personal  culture,  ScJiiiffle  inclines  to  the 
belief  that  the  whole  mechanism  of  unconsciously  governing  nature  is  des- 
tined ultimately  to  aid  in  the  realization  of  moral  good,  which  alone  is  really 
valuable.  Das  gesellschaftliche  System  der  menschlichen  Wirthschaft,  III, 
Auff.,  1873,  I,  3. 

1  Hermann,  loc.  cit,  ist  ed.,  i,  calls  internal  goods  whatever  each  of  us 
finds  in  himself,  the  free  gift  of  nature;  also  that  which  we  develop  in  our- 
selves by  our  own  free  action;  and  external,  whatever  we  create  or  obtain, 
through  the  external  world,  as  a  means  of  satisfying  our  wants.  The  internal 
goods  of  one  man  may  be  external  goods  to  another,  as,  for  instance,  when 
the  former  conveys  them  directly  to  the  latter  to  be  enjoyed,  by  words,  de- 
meanor, etc.,  or  indirectly,  in  combination  with  other  external  goods. 

^  The  exclusion  of  all  else,  has,  indeed,  been  called  one-sidedness  and  ma- 


Sec.  II.]  ECONOMIC  GOODS.  55 

ture,  the  less  apt  are  men  to  pursue  the  satisfaction  of  their 
wants,  isolated  from  their  fellows,  or,  in  other  words,  to  carry- 
on  their  economies  or  husbandries  apart  from  one  another. 
The  more  numerous  the  wants  of  men,  and  the  more  different 
in  kind  their  faculties  are,  the  more  natural  does  exchange^  be- 
come. Since  all  goods  derive  their  character  as  goods  from 
the  fact  that  they  are  destined  to  satisfy  human  wants,  the 
very  possibility  of  exchange  must  greatly  increase  the  possi- 
bility of  things  to  become  goods.  Think  of  the  machinist, 
whose  products  are  used  only  by  the  astronomer,  while  the 
latter  is  never  in  a  way  to  manufacture  them  for  himself. 
{Hiifeland.)  Commerce  is  the  series  of  combinations,  created 
by  the  interchange  of  services:  "a  living  net  of  relations, 
which  wants  and  services  are  ever  weaving  and  unweaving." 
{Hermann^  As  a  rule,  with  an  advance  in  civilization,  there 
is  an  increase  in  the  number  of  goods,  which  become  economic 
goods,  and  in  the  number  of  economic  goods  which  become 
commercial  goods  (objects  or  means  promotive  of  commerce)."^ 
But  this  is  to  be  considered  a  real  advancement  only  to  the 
extent  that  that  which  is  obtained  is  superior  to  that  which 
was  possessed  before,  in  consequence  of  the  specialization  of 
callings  or  the  greater  division  of  labor  (§  48  ff.).  When  a 
little  street  Arab  exacts  money  from  a  stranger  for  pointing 
out  the  way,  we  rightly  censure  him ;  but  no  one  would  find 


terialism.  But,  as  Senior  says,  no  one  blames  the  writer  on  tactics,  because 
he  confines  liis  attention  to  mihtary  subjects ;  nor  is  the  objection  raised,  that 
by  so  doing,  he  is  encouraging  eternal  war.  On  the  other  hand,  J.  B.  S torch 
(1815)  devoted  a  special  division  of  his  work  to  the  consideration  of  "internal 
goods  "  (health,  knowledge,  morality,  security,  leisure,  etc.).  See  RaiCs  trans- 
lation of  his  Manual,  II,  337  ff.  Compare  Gioja^  Nuovo  Prospetto  delle 
Scienze  economiche,  1815  ft'.  VIII. 

3  The  inclination  to  exchange  is,  according  to  Adam  S?mtli,  one  of  the  most 
important  marks  which  distinguish  man  from  the  brute.  (Wealth  of  Nations, 
I,  ch.  2).  But  see  Busch,  Geldumlanf  (1780),  I,  §  29,  on  exchange  among  the 
lower  animals. 

*  Observed  by  Aristoi.    Polit.  I,  ch.  6. 


56  INTRODLXTION.  [Cii.  I. 

it  improper  if  he  should  first  fit  himself  to  play  the  part  of  a 
guide,  and  then  live  by  his  calling.^ 


SECTION  III. 

GOODS.  — THE  THREE  CLASSES  OF  GOODS. 

All  economic  goods  are  divided  into  three  classes: 
A.  Persons  o?'  fersonal  sei'vkes.     It  is  entirely  repugnant  to 
the  feeling  of  humanity  to  regard  a  man's  person  in  its  entirety 
as  an  instrument  intended  to  satisfy  the  wants  of  another.^ 

5  The  efforts  of  political  economists  to  select  from  among  the  infinite  num- 
ber of  goods,  those  which  should  constitute  the  subject  of  their  investigations, 
have  taken  two  directions  in  recent  times.  Bastiat  liere  confines  himself  too 
exclusively  to  commerce.  The  political  economist  should  concern  himself 
only  with  wants  and  satisfactions,  where  the  labor,  which  is  the  connecting 
link  between  them,  is  undertaken  by  some  other  person  for  a  consideration. 
Thus  the  ordinary  act  of  respiration  lies  outside  the  circle,  that  of  the  diver, 
which  is  paid  for,  does  not.  (Harmonies  economiques,  1850,  68  ff.)  But 
even  Robinson  Crusoe  had  his  own  system  of  economy.  Are  the  products 
which  the  farmer  consumes  in  his  own  home,  the  work  he  does  himself,  any 
the  less  matters  of  economic  inoment  than  the  products  he  sells,  or  the  labors 
of  his  servants.?  ScJiafflc  is  right  when  he  says  that  ordinary  respiration  is 
no  economic  function,  because  it  is  an  unconscious  necessity  of  nature.  But 
his  definition  is  too  broad,  inasmuch  as  he  places  the  essence  of  the  economic 
character  of  goods  or  of  an  act,  in  the  conscious  adaptation  of  means  to 
human  ends.  (Tiibinger  Progr.  z.  27  Sept.  1862,  9,  24  seq.)  To  take  a 
walk  is  no  economic  operation,  although  it  may  be  the  best  means  to  a  very 
important  end,  —  health.  The  same  goods  or  the  same  act  may  have,  fre- 
quently, according  to  the  end  proposed,  an  economic  or  non-economic  char- 
acter. The  beauty  of  the  human  bodj^,  for  instance,  however  systematically 
made  use  of  for  purposes  of  vanity,  is  not  economic  goods.  But  it  is  an 
economic  speculation,  base  though  it  be,  when  a  man  relies  on  his  handsome 
figure  to  secure  a  Avealthy  wife,  or,  for  purposes  of  gain,  allows  her  to  pose  as 
a  model  to  artists  or  to  take  part  in  tableaux  vivants.  According  to  C.  Men- 
ger,  Grundsatze  der  Volkswirthschaftslehre  (1871)  I,  51  ff.,  there  are  no  eco- 
nomic goods,  but  those  the  disposable  supply  of  which  is,  at  most,  equal  to 
the  quantity  that  is  required.  But  is  not  the  largest  navigable  stream,  even 
in  the  most  thinly  populated  country,  an  economic  good.? 

'  Hegel,  Rechtsphilosophie,  §  67.  Even  the  use  of  a  corpse  as  manure,  or 
for  any  mercantile  purpose,  is  repugnant  to  our  feelings,  "because  of  the  dig- 


Sec.  III.]  THREE  CLASSES  OF  GOODS.  57 

Yet  this  happens  wherever  slavery  exists ;  in  its  coarsest  form, 
in  cannibaHsm.  Among  civilized  nations,  we  can  speak,  under 
this  head,  only  of  individual  services  or  capabilities  of  persons ; 
or,  indeed,  of  the  aggregate  of  the  services  rendered  by  them 
during  a  time  determined  at  pleasure,  or  a  short  time.^ 

B.  Things,  both  moveable  and  immovable.^ 

C.  delations  to  persons  or  things  which  may  frequently  be 
estimated  just  as  accurately  as  material  goods.     (The  res  in- 

nity  of  personality."  {Sckafflc,  National  CEkonomie,  i860,  28.)  In  this  re- 
spect, pi-ostitution  is  a  remnant  of  slavery.  Scliajfle  is  right,  when  he  says 
that  to  repay  personal  services  with  material  commodities  which  do  not  aiford 
as  much  food,  etc.,  as  the  former  have  cost  in  expenditure  of  vital  energy,  is  a 
slow  and  frequently  a  very  cruel  kind  of  cannibalism.  (Kapitalismus  und 
Socialismus,  1S70,  iS). 

"^  Bornitz^  De  rerum  Sufficientia  in  Republica  procuranda,  1625,  gives  in  this 
encycloptedia  of  political  science,  together  with  a  dissertation  on  agricul- 
ture, commerce  and  manufactures,  a  complete  survey  of  the  ministeria. 
Several  modern  writers  refuse  to  look  upon  personal  services,  or  the  ability 
to  render  such  services,  as  elements  of  wealth:  compare  Kaufmann,  Unter- 
suchungen  im  Gebiete  der  politischen  CEkonomie,  1S30,  II,  Heft  I.  They 
demonstrate,  however,  no  more  than  this,  that  that  class  of  goods  has  some- 
thing very  peculiar.  Thus  MaltJius,  Principles  of  Political  Economy  (1S20), 
chap.  I,  sect.  I,  objects  that  they  cannot  be  inventoried  or  taxed;  but  can  ma- 
terial goods  be  so  completely.''  Can  all  the  parts  of  the  wealth  of  a  nation 
be  so  inventoried  and  taxed.?  Ran,  Lehrbueh  der  pol.  CEkonomie  (1826)1, 
g  46,  remai-ks  that  the  personal  aptitude  to  perform  services  dies  with  the 
person,  and  that  personal  services  cannot  be  stored  up  (.?),  etc.  I  appeal 
simply  to  the  definition  I  have  given  above  of  economic  goods,  and  which 
applies  equally  to  services  of  eveiy  kind  which  can  be  performed  for  other 
people.  Besides,  those  who  oppose  this  view  are  unable  to  give  a  satisfactory 
explanation  of  all  the  phenomena  of  commerce.  Of  course,  the  qualification 
"recognized  as  useful"  is  of  the  utmost  importance  as  a  mark  to  determine 
what  is  goods.  But  a  prima  donna,  or  a  world-renowned  physician,  cast  na- 
ked by  shipwreck  on  the  shores  of  North  America,  is  certainly,  better  off 
than  a  blind  beggar,  his  fellow  sufferer.  Compare  Storclt,  Handbuch  II,  335 
ff.  and  his  Considerations  sur  la  Nature  du  Revenu  National. 

^Ad.  Muller  compares  persons,  so  far  as  they  render  any  kind  of  service,  to 
things,  and,  so  far  as  they  are  required  to  be  preserved  in  their  individuality,  to 
persons.  The  children  in  the  "status  "  of  a  country  gentleman,  for  instance, 
are  treated  more  as  persons,  and  domestics,  more  like  things ;  the  land  par- 
takes of  a  species  of  personality,  but  not  the  implements  of  labor.  (Noth- 
wendigkeit  einer  theolog.  Grundlage  der  Staatswissenschaft,  1S19,  48.) 


58  INTRODUCTION.  [Ch.  I 

cor^oralcs  of  the  Roman  law.)  I  need  only  mention  what  is 
called  good-wiU,  which  freely,  and  to  the  advantage  of  custom- 
ers themselves,  but  still  with  a  limited  amount  of  certainty, 
attaches  to  certain  localities,  and  for  which  tavern-keepers, 
sometimes,  as  in  theaters,  depots  and  clubs,  pay  so  enormous 
a  rent.^  When  a  newspaper  is  sold,  the  purchaser  frequently 
buys  nothing  but  the  existing  relations  between  his  colaborers, 
subscribers  etc.  No  small  part  of  the  value  of  a  good  busi- 
ness firm  consists  in  the  confidence  with  which  it  inspires  all 
who  deal  with  it,  thus  sparing  them  a  world  of  care  and 
trouble.^  A  general  may  be  of  incalculable  value  to  an  army 
which  he  has  himself  helped  organize.  In  another,  or  in  the 
service  of  a  country  not  his  own,  he  might  be  entirely  value- 
less, incapable  of  accomplishing  anything.^  With  the  progress 
of  civilization,  as  man  becomes  more  social,  the  number  of 
valuable  relations  increases,  while  that  of  legalized  monopolies 
is  wont  to  decrease.     {Schajle.y 

^The  privilege  of  selling  refreshments  in  the  garden  of  the  Palais  Royal 
■was  formerly  let  for  38,000  Irancs  a  year. 

5  See  the  cases  cited  by  Hermmin^  Staatswirtsch.  Untersuchungen,  6  fF.  and 
by  Be7'nouilli^  Schweiz.  Archiv.  fiir  Statistik  und  N.  CEkon.  II,  55.  Think  of 
the  firm  of  J.  M.  Farina!  In  Athens,  good  stands  were  leased  at  a  very  high 
rent,  even  where  there  was  no  investment  of  the  lessee's  capital.  {Demos- 
thenes, pro.  Phorm.,  948;  adv.  vSteph.  I,  mi.)  There  is,  again,  the  sale  of  in- 
ventions, while  they  are  still  "  mere  ideas."  According  to  Schdffe,  Theorie 
der  ausschliessendnen  Verhaltnisse,  1867,  II  ff.,  the  value  in  exchange  of  these 
relations  depends  on  the  extra  income  \Ahich  is  assured  in  fact,  or  in  law, 
against  diminution,  by  the  exclusion  of  competition.  He,  therefore,  recom- 
mends, instead  of  the  word  "relations,"  "custom,"  or  "publicum."  But  these 
words,  by  no  means,  exhaust  the  meaning  expressed  by  "  relation."  Thus, 
the  good  administration  of  public  affairs,  although  it  has  no  value  in  ex- 
change, is  one  of  the  most  valuable  economic  goods  Avhich  a  people  can 
possess. 

^  The  relation  mentioned  above  of  a  general  to  an  army  may  even  have 
great  value  in  exchange.  Instance,  the  Italian  condottieri  in  the  fifteenth 
century ! 

^Relations  which  take  from  one  man,  as  much  as  they  afford  to  their 
possessor,  arc  of  value  as  components  of  a  man's  private  fortime,  hut  not  of 
the  wealth  of  the  nation.    To  this  class  belong  debts  due  from  persons  or 


Sec.  IV.]  VALUE  IN  USE.  59 

SECTION  IV. 

OF  VALUE.  — VALUE  IN  USE. 

The  economic  value  of  goods  is  the  importance  they  pos- 
sess for  the  purposes  of  man,  considered  as  engaged  in  econ- 
omy (housekeeping,  husbandry.^) 

Looked  at  from  the  point  of  view  of  the  person  who  wishes 
to  employ  them  in  his  use  directly,  doubtless  the  oldest  point  of 
view,  value  appears  first  as  value  in  use ;  and  here,  according 
to  the  difference  of  subjective  purposes  it  is  intended  to  sub- 
serve, we  may  speak  of  production  value  or  enjoyment- value; 
and  of  this  last,  in  turn,  as  utilization-value,  or  consumption- 
value.  The  value  in  use  of  goods,  is  greater  in  proportion  as 
the  number  of  wants  they  are  calculated  to  satisfy  are  more  gen- 
eral and  more  urgent,  and  in  proportion  as  they  are  gratified 
by  them  more  fully,  surely,  durably,  easily  and  pleasantly.^ 
Hence,  it  is  seldom  possible  to  find  an  accurate  mathematical 
expression  of  the  relation  which  exists  between  the  value  in 
use  of  different  goods.^     Thus,  it  is  possible  to  estimate  the 

from  things,  compulsory  custom  or  good-will  of  every  description;  as  for  in- 
stance, the  seventy -two  places  of  the  agents  de  change  in  Paris,  each  of  which 
was  worth  more  than  a  million  of  francs;  or  the  right  of  navigating  the  Elbe 
as  far  as  Magdeburg,  which,  about  the  beginning  of  this  century,  was  worth 
in  every  instance  about  10,000  thalers.    {Krug^  Abriss.  der  St.  OSkonomie,  62.) 

'  Schafflc,  N.  Qi^konomie,  10.  In  the  German  language,  this  same  word 
is  used  to  designate  utility,  and  sometimes  useful  objects  (so  called  values). 
A  clear  distinction,  however,  should  be  made  between  utility  and  value  in 
use.  Utility  is  a  quality  of  things  themselves,  in  relation,  it  is  true,  to  human 
wants.  Value  in  use  is  a  quality  imputed  to  them,  the  result  of  man's 
thought,  or  of  his  view  of  them.  Thus,  for  instance,  in  a  beleagured  city,  the 
stores  of  food  do  not  increase  in  utility,  but  their  value  in  use  does.  Com- 
pare ScJiiiffle^  System,  III,  I,  170. 

^  Genovcst^  Economia  civile  (1S69),  II,  I,  7.  L.  Say,  De  la  Richesse  indi- 
viduelle  et  de  la  Richesse  publique  (1827),  29,  estimates  the  value  of  goods 
according  to  the  degree  of  discomfort  attendant  on  the  privation  of  them. 

"^  Fricdldndcr  has,  however,  made  a  general  attempt  in  this  direction. 
Theorie  des  Werthes  (Dorpat,  1S52).     But  says  Th.  Fix  (Journal  des  Econ- 


60  INTRODUCTION.  [Ch.  I. 

nutritive  power  of  different  kinds  of  goods,  the  value  of  wheat 
or  of  hay  for  instance,  but  not  the  goodness  or  quality  of  their 
taste,  of  the  attractiveness  of  their  appearance,  etc. 

But,  the  more  men  become  used  to  comparing  the  aggregate 
of  human  wants,  and  the  aggregate  of  the  goods  which  minis- 
ter to  the  satisfaction  of  these  wants,  as  if  they  were  two  great 
wholes,  gradually  shading  each  into  the  other,  the  more  does 
the  value  in  use  of  the  different  kinds  of  goods  assume,  for 
purposes  of  social  rating  or  estimation,  a  fungible  character/ 
If  a  new  kind  of  goods  be  produced  or  discovered,  which  sat- 
isfies the  same  wants  in  a  more  complete  manner  than  an- 
other, the  latter,  although  it  has  suffered  no  change,  generally 
loses  in  the  value  put  upon  it,  especially  if  the  new  goods  can 
be  produced  in  any  desired  quantity.  An  instance  of  this  is 
the  change  effected  in  the  value  of  the  dyers  weed,  woad,  by 
the  introduction  of  indigo. 

Things  present  in  quantities  greater  than  the  amount 
necessary  to  supply  the  want  they  satisfy,  preserve  their  lull 
value  in  use,  to  the  limit  of  that  want,  after  which  they  are 
simply  an  element  of  possible  future  value,  dependent  on  an 
increase  of  the  want ;  but  they  have  no  value  for  present  use.^ 

The  economic  valuation  of  goods,  however,  is  by  no 
means  exhausted,  so  far  as  the  isolated  individual  house- 
keeper is  concerned,  by  the  mere  establishing  of  its  value  in 
use.     As  the  systematic  effort  of  every  rational  individual  in 

omistes,  1S44,  IX,  12) :  "  It  is  as  impossible  to  establish  a  scale  of  values,  as  it 
is  to  find  an  exact  mathematical  and  permanent  measure  of  our  wants,  pas- 
sions, desires,  tastes  and  fancies." 

4  Compare  Knies,  Geld  und  Credit,  1S73,  I,  126  ff.  The  very  respectable 
attempt  made  by  A.  Satnter,  Sociallehre  (1S75),  with  the  idea  society-value 
{Geselhchaftsxverth)  covers  too  nearly  the  idea  of  value  in  exchange.  Fur- 
ther research  will  here  have  to  be  made,  with  the  idea  of  "impotent  need," 
inasmuch  as,  from  a  high  ethical,  national-dietetical  point  of  view,  the  ques- 
tion is  asked  whether,  to  what  extent,  and  how,  "  impotent  need  "  may  be 
made  a  potent  one. 

^  Friedldnder,  loc.  cit.,  50.  If  too  many  copies  of  the  very  best  book  be 
published,  there  is  a  certainty  that  a  number  of  them  will  remain  little  better 
tlian  waste  paper. 


Sec.  v.]  value  IN  EXCHANGE.  Qi 

his  household  management  is  directed  towards  the  obtaining, 
by  a  minimum  of  sacrilice  of  pleasure  and  energy,  a  maxi- 
mum satisfoction  of  his  wants,  even  an  Adam  or  a  Crusoe  is, 
in  his  economy,  compelled  to  estimate  not  only  what  the  goods 
to  be  acquired  accomi:)lish  (value  in  use)  but  also  what  they 
will  cost  —  cost-^'alue.  Even  the  most  indispensable  kind  of 
goods,  for  instance  atmospheric  air,  is  considered  to  have  no 
value,  when  it  can  be  obtained  in  sufficient  quantity,  without 
any  sacrifice  whatever.^ 

SECTION  V. 

VALUE.  — VALUE  IN  EXCHANGE. 

The  value  in  exchange  of  goods,  or  the  quality  which  makes 
them  exchangeable  against  other  goods,  is  based  on  a  combi- 
nation of  their  value  in  use  with  their  cost-value,  such  as  men 
in  their  intercourse  with  one  another  will  make.^  Without 
A'alue  in  use,  value  in  exchange-  is  unthinkable. 

But  there  are  many,  and  even  indispensable  goods  which 
are  not  at  all  susceptible  of  being  exchanged;  for  instance, 
the  light  and  heat  of  the  sun,  the  open  sea  etc.^    Other  goods, 

^  Sclidffie,  System,  II,  aufl.,  55.     See  also  his  Kapitalismus  unci  Socialismus, 

1S70,  31.  35>  43- 

^  Thus  Klcin-wiichtcr  (Hildebrand's  Jahrbiicher  fur  N.  Oek.  und  Statistik, 
1S67,  II,  31S),  defines  value  in  exchange  =: value  in  use  +  costliness.  Ac- 
cording to  Schaffle,  it  is  "  a  covert  comparison  between  the  cost- value  and 
the  value  in  use  of  the  two  kinds  of  goods  to  be  exchanged."  (Kapitalismus 
und  Socialisinus,  35.) 

*  An  intermediate  dealer  can,  so  far  as  he  is  himself  concerned,  attribute 
value  in  exchange  to  goods  only  to  the  extent  that  they  have  use  for  the  last 
person  who  has  acquired  them.  Hence,  Storch  calls  value  in  use  immediate, 
and  value  in  exchange^  mediate  value.  As  the  English  are  always  wont  to 
express  the  immediate  in  words  of  Germanic  origin,  and  the  mediate  in  words 
borrowed  from  the  Latin,  Loche  calls  value  in  use  "  worth,"  and  value  in  ex- 
change, simply  "  value."  {K,  Marx,  Das  Kapital.  Kritik  dcr  politischen 
CEkonomic,  1S67,  i,  2.) 

3  It  is,  of  course,  otherwise  when,  for  instance,  a  beautiful  sea  view,  or  a 
desirable  position  as  regards  air  and  sunshine,  is  connected  with  a  piece  of 
land. 


62  INTRODUCTION.  [Ch.  I 

although  capable  of  being  exchanged,  have  no  value  in  ex- 
change, because  they  exist  in  superabundance,  and  may  be 
obtained  by  everyone,  without  trouble  and  without  reward; 
for  instance,  drinking-water  in  most  places,  ice  in  winter,  and 
wood  in  the  primeval  forest.^  Moreover,  the  idea  of  such 
"  free  goods  "  is  in  great  part  relative.  The  water  of  a  river 
may,  for  drinking  purposes,  be  "  free  "  goods,  and  yet,  for  pur- 
poses of  irrigation,  have  great  value  in  exchange.  {John 
Stuart  Mill). 

But,  goods,  to  obtain  value  in  exchange,  must,  in  addition  to 
their  value  in  use,  a  value  which  must  be  recognized^  by 
a  certain  number  of  persons,  at  least ,  have  the  capacity  of  be- 
coming the  exclusive  property  of  some  one  individual,  and 
therefore  of  being  alienated  or  transferred;  and  this  alienation 
or  transfer  must  be  desired  because  of  the  difficulty  to  become 
possessed  of  them  in  any  other  way.^ 

■*  In  Ravenna  a  cistern  had  greater  value  in  exchange  than  a  vineyard : 
Martial^  III,  56.  In  Paris,  too,  drinking  water,  vs^hich  is  transported  only  with 
considerable  trouble,  costs  i  Y^  thalers  per  cubic  meter.  We  may  also  men- 
tion snow  and  ice  in  summer,  which  last  sells  in  the  capitals  of  southern 
Europe  at  0.34,  silber  groschens  per  pound.  According  to  Carcy^  "  utility  "  is 
the  measure  of  man's  power  over  nature,  "  value,"  the  measure  of  nature's 
power  over  man.  He  very  inaccurately  adds,  that  both  are  always  in  an  op- 
posite direction.     (Principles  of  Social  Science,  1S61,  VI,  ch.  9.) 

5  Hence  Ad.  Miiller  calls  value  in  use,  individual  value,  and  value  in  ex- 
change, social  value.  The  Germans  call  the  value  of  goods  whose  value  in 
use  is  recognized  by  only  one  person,  Affedtonszuerth,  (affection-value)  a  value 
which  influences  its  value  in  exchange  only  when  the  individual  who  holds 
it  in  high  esteem  is  not  himself  the  possessor  of  the  goods.  An  instance  of 
this  latter  is  a  piece  of  paper  covered  with  notes,  intelligible  only  to  the  maker 
of  them. 

*The  very  important  difference  between  value  in  use  and  value  in  ex- 
change was  recognized  even  by  Aristotle.  Arisiot.  Pol.  I,  9.  Hutchinson, 
System  of  Moral  Philosophy  (1755),  II,  53  ff.  The  Physiocrates  speak  very 
frequently  of  valetir  usuella  and  vdnale,  on  which,  according  to  Duj^ont, 
Physlocratie,  CXVIII,  the  difference  between  Mens  and  richcsses  is  based. 
La  valctcr  d'un  sefUer  de  bid.,  consider^  comme  richesse  ne  consiste  que  datis  son 
p'ix.  {^Hcsnay,  ed.  Dairc,  300.)  Turcot  distinguishes  between  '■'•valeiir 
estimative''''  and  '■'■  echangeable  or  apprdciative ;'"  the  former  designating 
the  relation  between  the  amount  of  energy,  physical  and  mental,  which  one 


Sec.  VI.]  ALLEGED  CONTRADICTION.  '  63 


SECTION  VI. 

VALUE.  — ALLEGED  CONTRADICTION  BETWEEN  VALUE  IN 
USE  AND  VALUE  IN  EXCHANGE. 

Recent,  and  Especially  socialistic,^  writers  have  alluded  to 
the  great  "  contradiction "  between  value  in  use  and  value  in 
exchange.  This  contradiction,  however,  vanishes  when  the 
above  idea  of  economy,  and  the  two  sides  or  aspects,  which 
economic  value  presents,  are  kept  steadily  in  view.  It  is  said, 
for  instance,  that  a  pound  of  gold  has  a  much  greater  value  in 
exchange  than  a  pound  of  iron;  while  the  value  in  use  of 
iron,  is  incomparably  greater  than  that  of  gold.     I  question 

is  willing  to  spend  in  order  to  obtain  the  goods,  to  the  sum  total  of  his  ener- 
gies, physical  and  mental ;  the  latter  the  relation  between  the  aggregate  like 
energy  of  two  persons  which  they  are  willing  to  spend  in  order  to  procure 
each  of  the  goods  to  be  exchanged,  and  the  sum  total  of  their  energies  in 
general,  (^''aleurs  et  Monnaies,  p.  87,  seq.,  6d.  Dair.e.)  Ad.  Stnith,  in  his  Wealth 
of  Nations,  I,  ch.  4,  shows  that  he  knew  the  difference  between  value  in  use 
and  value  in  exchange ;  but  he  afterwards  drops  the  consideration  of  the 
former,  altogether.  In  this  respect  he  has  had  only  too  faithful  and  one-sided 
followers  among  his  countrymen,  so  that  Ricardo,  Principles,  ch.  28,  asks 
what  value  in  exchange  can  have  in  common  with  the  capacity  of  commodi- 
ties to  serve  as  food  or  clothing.  (See,  however,  ch.  XIX  seq.)  Many  "  free 
traders  "  would  have  no  objection  to  interpose,  if  a  people  should  abandon 
the  cultivation  of  wheat,  etc.,  to  devote  themselves  exclusively  to  the  manu- 
facture of  point  lace,  provided  the  latter  had  a  greater  value  in  exchange. 
The  two  degrees  of  the  idea  of  value  have  been  examined  with  much  thor- 
oughness by  Hufdand  in  his  Neue  Grundlegung  der  Staatswirthschaftskunst 
(1807),  I,  118  ff.;  Lotz,  Revision  der  Grundbegriffe  (iSii  ff.),  I,  31,  ff.;  Storch, 
Handbuch,  i ;  Raii^  Lehrbuch,  I,  56,  ff. ;  Thomas^  Theorie  des  Verkehrs,  I,  p. 
11;  /iTw/c.?,  Tubing.  Zeitschr.  1S55;  Bastiafs  declaration  (Harmonies,  p.  171 
ff.) :  that  "  valour  "  (by  which  Bastiat  means  only  value  in  exchange),=/e  rap- 
fort  dc  deux  services  ec7ia7}gds,  contains  a  two-fold  error:  the  ambiguity  of 
the  word  services,  which  applies  equally  to  a  yielding  or  affording  of  utility, 
as  to  useful  labor,  and  the  error  that  the  labor  necessary  to  produce  a  com- 
modity, and  of  which  the  purchaser  is  relieved,  alone  determines  its  value  in 
exchange.  Compare  tjifra  §§  47,  107,  no,  115  ff.,  and  Knies,  loc.  cit.,  p. 
644  ff. 

^Proudhon,  Systfeme  des  Contradictions  economiques,  1S46,  ch.  2. 


64:  INTRODUCTION.  [Ch.  I 

this  latter  statement.  True  it  is,  that  the  need  of  iron  is  much 
more  universal  and  urorent  than  the  need  of  opold.  On  the 
other  hand,  a  pound  of  gold  yields  satisfaction  to  the  want  of 
that  metal,  much  greater  than  is  yielded  by  a  pound  of  iron,  to 
the  want  of  iron.  We  may  speak  of  a  contradiction  between 
value  in  use  and  value  in  exchange,  at  the  farthest,  only  in  case 
the  existing  quantity  of  an  article  in  trade,  which  can  be  done 
without,  is  not  estimated  correspondingly  lower  than  the  whole 
existing  supply  of  a  thing  which  is  indispensable.  But  this  is 
a  case  which  cannot  often  occur.  When,  for  instance,  wheat  is 
very  dear,  as  in  years  of  scarcity,  people  prefer  to  pay  a  very 
high  price  for  it  rather  than  to  dispense,  even  in  part,  with  its 
use ;  and  so  of  all  the  necessaries  of  life.  As  people  progress 
in  economic  culture,  they  become  more  expert  in  adapting  the 
value  in  exchange  of  related  goods,  not  only  to  their  cost- 
value,  but  also  to  their  value  in  use."  ^ 

The  lower  the  state  of  a  nation's  economy,  the  more  isolated 
men  live  from  one  another,  the  greater  is  the  prominence  given 
by  them  to  value  in  use,  as  compared  with  value  in  exchange, 
a  fact  which  makes  a  valuation  of  resources,  which  shall  be 
universally  applicable,  a  more  difficult  matter.*  ^^ 

^  In  France,  according  to  Cordicr  (Memoire  sur  I'Agriculture  de  la  Flandre 
Fran9aise),  the  wheat  harvest  yielded,  in 

1S17,  forty-eight  million  hectolitres,  with  a  value  in  exchange  of  two  thous- 
and and  forty-six  million  francs ;  in 

1818,  fifty-three  million  hectolitres,  with  a  value  in  exchange  of  one  thous- 
and four  hundred  and  forty-two  million  francs ;  in 

1819,  sixty-four  million  hectolitres,  with  a  value  in  exchange  of  one  thous- 
and one  hundred  and  seventy  million  francs. 

A  rise  in  the  value  in  exchange  of  wheat,  such  as  was  witnessed  in  1S17, 
is  synonymous  with  a  decline  in  the  value  in  exchange  of  money,  and  of  all 
those  goods  whose  money  price  has  not  risen.  It  is  no  objection  to  the  views 
here  advocated,  that  when  the  necessaries  of  life  are  vei-y  scarce,  the  want 
of  clothing,  furniture,  articles  of  luxury  etc.,  is  not  felt  so  keenly  as  at  other 
times,  and  that  the  value  in  use  of  these  commodities  really  falls ;  and  vice 
versa. 

3  Compare  B.  Hildebrand^  N.  CEkonomie  der  Gegenwart  und  Zukunft; 
1848,  I,  p.  316  fF.     Kvics,  loc.  cit. 

*  The  greater  importance  attached,  in  our  days,  to  value  in  exchange,  than 


Sec.  VII.J  RESOURCES  OR  MEANS.  65 

SECTION  VII. 

RESOURCES  OR  MEANS  (VERMOGEN). 

Resources^  or  means,  in  the  sense  in  which  we  here  use  the 
term,  are  the  aggregate  of  economic  goods  owned  by  a  phys- 
ical or  legal  person,  after  deduction  is  made  of  the  person's 
debts,  and  all  valuable  and  rightful  claims  have  been  added.^ 
Hence,  there  are  private  resources,  corporative  resources, 
municipal  resources,  etc.,  state  resources,  national  resources 
and  the  world's  resources.  In  estimating  the  resources  of  a 
whole  people,  it  is,  of  course,  necessary  to  make  deduction  of 
the  debts  due  by  the  individual  members  of  the  nation  to  their 
fellow  countrymen.^ 

to  value  in  use,  is  seen  especially  in  the  attitude  which  the  buyer,  who  is  pos- 
sessed of  the  more  current  commodity  (money),  assumes  toward  the  seller, — 
an  attitude  not  unlike  that  of  a  patron  towards  his  client.  In  the  interior  of 
Africa,  the  possessor  of  money,  as  such,  would  scarcely  look  down  on  the 
possessor  of  the  means  of  subsistence.  The  South  American  Indians  are 
ready  to  render  an  amount  of  service  for  a  little  brandy,  which  it  would  be 
in  vain  to  ask  them  to  perform  for  ten  times  its  value  in  gold.  (Ausland, 
Jan.  15,  1S70.)  The  miser  estimates  the  possibility  of  being  able  to  procure 
for  himself,  for  one  dollar,  a  hundred  difterent  articles  worth  a  dollar  each,  to 
be  worth  one  hundred  dollars. 

'  When  the  wants  of  a  person  or  of  a  people  change,  it  is  possible  for  the 
value  in  use  ot  one  kind  of  goods,  which  had  the  greater  prominence  before, 
to  take  the  place  occupied  previously  by  its  value  in  exchange ;  and  vice  versa. 
Thus,  the  youth  sells  the  plaything  he  used  in  childhood;  the  man,  the  educa- 
tional apparatus  of  his  earlier  years ;  the  old  man,  the  implements  that  enabled 
him  to  acquire  wealth,  and  which  he  can  no  longer  use  except  with  great 
effort.     (Mciiger,  Grundsatze,  I,  220  ff.) 

*  Rau  (Lehrbuch,  I,  §  61  ff.)  distinguishes  between  the  concrete  or  quanti- 
tative value  which  a  certain  kind  of  goods  may  have  for  a  certain  person, 
under  certain  circumstances,  and  the  abstract  or  species-value  which  a  whole 
class  of  commodities  may  have  for  men  in  general. 

But  F.  y.  Neumann,  (Tubinger  Zeitschrift,  1S72,  p.  2SS  ff.)  objects,  that 
even  the  abstract  value  of  a  commodity  always  suggests  the  relation  of  a 
definite  number  of  concrete  men  to  a  definite  quantity  of  goods;  else,  by  the 
expression,  value  of  goods,  is  to  be  understood  not  what  it  is  generally  meant 
to  signify,  but  only  the  capacity  to  satisfy  a  single  want. 

'  Storch,  Ueber  die  Natur  des  Nationaleinkommens  (1S24,  1825),  5,  defines 
Vol.  I.— =; 


65  INTRODUCTION.  [Cn.  I. 

SECTION  VIII. 

VALUATION  OF  RESOURCES. 

It  has  often  been  made  a  question,  whether  the  valuation  of 
resources  should  be  based  on  the  value  in  use,  or  the  value  in  ex- 
change of  their  constituent  parts.^  The  latter  has,  of  course, 
no  interest,  except  in  so  far  as  we  are  concerned  with  the  possi- 
bility of  obtaining  the  control  of  part  of  the  resources,  or 
means,  of  another,  by  the  surrender  of  a  part  of  one's  own 
goods.  In  estimating  the  value  of  private  resources,  which 
require  to  be  made  continually  an  object  of  trade,  this  point  is, 
of  course,  of  the  greatest  importance.  If  certain  of  their  com- 
ponent elements,  lands,  for  instance,  belonging  to  a  fclci  coin- 
inissjtiu,  are  incapable  of  entering  immediately  into  the  market, 
at  least  the  revenue  they  yield  is  measured  by  its  value  in  ex- 
change. 

It  is  quite  otherwise,  even  with  the  resources  of  a  whole 
nation.  Such  resources  are,  evidently,  much  more  independ- 
ent, and  have  much  less  need  of  being  exchanged  against 
their  equals,  than  private  resources.  The  foreign  commerce, 
of  the  greatest  and  most  advanced  nations,  has,  hitherto,  been 
but  a  small  quota  of  their  internal  commerce.^     A  valuation, 

resources  (  Vcrmogen)  thus :  a  source  of  income,  permanent  in  its  nature,  and 
capable  of  being  transmitted,  the  possessor  of  which  does  not  need  to  work, 
on  its  account.  Hence  he  does  not  approve  of  the  expression  "  the  people's 
resources  "  (  Volksvermogen). 

1  See  especially  Lord  Laudeydalc,  Inquiry  into  the  Natvire  and  Origin  of 
Public  Wealth,  1804,  ch.  2.    Siorc/i,  loc.  cit. 

^  Morcaii  de  yonnhs,  Le  Commei-ce  au  19.  Siicle  (1S25)  I,  114  ff.,  says  that 
the  United  States  imported  from  abroad  9.6,  France  6,  and  Great  Britain 
5.8  per  cent,  of  their  annual  consumption ;  and  exported  respectively  10.4, 
6.2,  9.8  per  cent,  of  their  annual  production.  The  recent  free  trade  tendencies, 
and  the  improvement  in  the  international  means  of  transportation,  have  cer- 
tainly increased  the  relative  importance  of  foreign  commerce.  In  the  king- 
dom of  Saxony  (1S53),  Engel  estimates  that  1^  of  the  whole  production  of 
the  country  was  destined  for  foreign  counti-ies,  and  that  \^  of  the  consump- 
tion was  imported. 


I 


Sec.  VIII.]  VALUATION  OF  RESOURCES.  67 

therefore,  based  on  value  in  exchange,  however  interesting  it 
might  be  to  enable  us  to  determine  how  property  is  shared  by 
the  diticrcnt  classes  and  persons  that  compose  the  nation, 
would  atlbrd  but  little  information  concernin<x  the  absolute 
amount  of  the  national  wealth.  This,  of  course,  applies  in  a 
much  higher  degree  to  the  resources  of  the  whole  world. 

If,  now,  we  were  to  estimate  the  resources  of  an  entire 
people,  or  even  of  the  world,  by  summing  up  the  value  in  ex- 
change of  their  several  component  parts,  many  ver}^  important 
elements  would  be  left  out  of  the  account  entirely;  as  for  in- 
stance, harbors,  navigable  streams,  numberless  relations  which 
have,  indeed,  no  value  in  exchange  whatever,  but  which  are 
of  the  highest  importance,  because  promotive  of  the  economy 
of  the  nation.  The  same  may  be  said  of  made  roads  of  every 
description,  the  politico-economical  value  of  which  may  be 
much  greater  than  the  value  in  exchange  of  their  stock,  than 
their  cost  of  production  etc.  The  increase  of  the  value  in 
exchange  of  any  of  the  branches  of  the  resources  of  a 
physical  or  legal  person  contributes  towards  really  enrich- 
ing the  nation  or  the  world,  only  in  case  that  the  increased 
value  in  exchange  is  based  on  an  increased  utility  in  qual- 
ity or  quantity.  Should  an  earthquake  suddenly  dry  up  a 
number  of  our  springs,  and  thus  give  value  in  exchange  to 
the  drinking  water  from  the  remaining  ones,  we  should,  in- 
deed, witness  the  introduction  of  a  new  object  into  the  list  of 
exchangeable  goods;  the  owners  of  springs  would  be  able  to 
command  a  larger  portion  of  the  national  resources,  but  at  the 
expense  of  the  rest  of  the  population;  and  the  whole  country 
would  have  become  poorer  in  goods  by  the  catastrophe.  Even 
the  value  in  exchange  of  the  national  resources  would  not  be 
increased;  for  all  other  goods,  which,  hitherto,  as  compared 
with  water,  had  an  unlimited  capacity  for  exchange,  would 
lose  just  as  much  of  that  capacity  as  water  had  gained,  as 
compared  with  them.^     On  the  other  hand,  if  a  new  mineral 

'When  the  land  of  a  country  becomes  dearer,  simply  on  account  of  the  in- 
crease of  population,  or  goods,  the  quantity  of  which  is  susceptible  of  increase, 


68  INTRODUCTION.  [Ch.  I. 

spring  should  be  discovered,  the  great  value  in  use  of  the 
water  of  which  gave  it  value  in  exchange,  the  resources  of  the 
nation  would  be  really  increased,  not  only  in  point  of  utility, 
but  in  exchange  value ;  for  no  other  goods,  formerly  known, 
would,  in  consequence  of  the  discovery,  lose  in  their  exchange 
power.  ^ 

SECTION  IX. 

WEALTH. 

The  possession  of  large  and  also  of  potentially  lasting  re- 
sources; objectively,  such  resources  themselves,  we  call  wealth. 
But  it  must  be  large  in  a  two-fold  sense ;  large  as  compared  with 
the  rational  wants  of  its  possessor,  and  large,  also,  as  compared 
with  the  resources  of  other  people,  especially  with  the  resources 
of  those  in  the  same  condition  of  life.  To  be  called  rich,  it 
is  not  enough  "  to  have  a  sufficiency,"  (the  individual  side) ;  it 
is  necessary  to  have  more  than  others.^     If  all  men  were  pos- 

because  the  cost  of  production  has  been  increased,  this  cannot  be  considered 
an  increase  in  tlie  wealth  of  the  people,     (v.  Mangoldt.) 

^Neither  is  value  in  exchange  a  quality  inherent  in  goods,  but  only  a  rela- 
tion between  them  and  other  goods.  Hence  it  is  absurd  to  speak  of  a  rise  or 
fall  of  all  values  in  exchange.  If  the  goods  A  lose  in  capacity  to  be  ex- 
changed against  goods  B,  goods  B  of  course  increase  in  exchange  power  as 
compared  with  A,  and  vice  versa.  It  is  necessary  to  guard  against  being 
misled  here  by  the  intervention  of  money,  that  is,  by  the  custom  universal 
among  men  of  employing  a  definite  kind  of  goods  as  a  medium  of  exchange 
for  all  others.  Yet  there  are  many  writers  who  have  been  thus  inisled.  Thus 
Galiani,  Delia  Moneta|(i75o),  II,  p.  2,  who  regards  the  lasting  increase  of 
the  prices  of  all  commodities  as  an  infallible  sign  of  national  prosperity.  To 
the  same  effect  is  the  motto  of  the  Physiocrates:  Abondanceet  chertd  c!est 
opulence.  In  its  coarsest  form,  in  Saint  Cluinians^  Nouv.  Essai  sur  la  Richesse 
des  Nations  (1824),  456,  who  would  have  that  which  is  now  the  free  gift  of 
nature,  to  come  to  us  or  be  produced  only  as  the  reward  of  toil.  Verri,-  on 
the  other  hand,  Meditazioni  sull.  econ.  pol.  (1771),  ch.  V,  thinks  that  the 
number  of  buyers  in  a  country  should  be  as  small  as  possible,  and  that  of 
sellers  as  great  as  possible,  in  order  that  thus  prices  might  be  low;  (as  if 
every  buyer  was  not,  eo  ipso,  also  a  seller.) 

^  Kauffnunn,  Untersuchungen,  I,  p.  165  seq.  Also,  Verri,  Meditazioni, 
XVII,  2. 


Sec.  IX.]  WEALTH.  69 

sessed  of  a  great  deal,  but  all  of  an  exactly  equal  amount,  each 
would  be  compelled,  it  may  be  conjectured,  to  be  his  own 
chimney-sweep,  his  own  scavenger  and  "boot-black."  And 
how  could  anyone,  then,  be  properly  called  wealth}^?  This  is 
the  social  side  of  the  idea  of  wealth.^  Hence,  a  person,  with 
the  same  resources,  might  be  very  wealthy  in  a  provincial  town, 
while,  in  the  capital,  he  could  enjoy  only  moderate  comfort.^ 

''The  difterences  characteristic  of  poverty,  indigence,  managing  to  Hve, 
fortune  and  -wealth,  cleverly  treated  by  von  Justi^  Staatswirthschaft,  i,  p. 
449,  seq.  Rau^  Lehrbuch  i,  g  76,  seq.,  establishes  the  following  gradation: 
privation  and  wretchedness,  poverty,  indigence,  "getting  on,"  comfort, 
wealth,  superfluity.  L.  Say  calls  those  who  can  satisfy  the  wants  of  luxury 
rich;  well-to-do,  those  who  can  command  the  comforts  of  life;  and  wretched, 
those  who  cannot  obtain  a  sufficiency  of  the  objects  of  prime  necessity.  In 
France,  the  limits  of  these  situations  are  marked  by  an  income  of  respect- 
ively 6o,ocx),  6,000  and  900  francs  per  family,  so  that  a  family  with  an  income 
of  only  300  francs  per  year  is  in  a  condition  of  wretchedness.  (Traite  de  la 
Richesse,  1S27,  I  ft'.,  71  ft") 

^Palmicn,  Ricchezza  nazionale,  Introd.  The  greater  number  of  the  defi- 
nitions of  wealth  are  rather  onesided  than  false.  Socrates,  for  instance,  looks 
only  at  the  relation  existing  between  means  and  their  owner's  wants.  {Xen- 
oj>h.  Memor.,  IV,  2,  37,  seq.  CEconom.  II,  2  ft".).  Plato,  on  the  other  hand,  as  the 
socialists  are  wont  to  do,  looks  to  the  excess  over  that  possessed  by  others. 
(Legg.  V,  742,  seq.).  Xenophoii' s  observations,  Hiero,  4,  on  the  nature  of  wealth, 
are  many-sided  and  beautiful.  Aristotle  distinguishes  between  natural  and 
artificial  wealth :  ~?J^&o:;  opyducou  olxovo [JLccxibv  xal  7ZO?.cT(Xcov  — 
7:}Jj&0^  iyOijlaixazoQ.  (Polit.,  i,  3,  9,  16.)  Compare  Cicero,  Parad.  YI. 
The  dominant  idea  of  the  so-called  Mercantile  System  is  thus  expressed 
in  a  Saxon  pamphlet  of  1530  (Miintzbelangende  Antwort,  etc.):  "Money  is 
the  real  watchword ;  where  there  is  much  money,  there  is  wealth,  it  is  clear." 
Compare  Lutlier,  Werke,  Irmisch  edition,  XXII,  p.  200  seq.  See  some  ex- 
cellent remarks  in  opposition  hereto,  in  the  Saxon  pamphlet,  Gemeyne  Stim- 
men  von  der  Muntz,  1530.  Schroder,  Furstliche  Schatz-und  Rentkammer, 
1686,  ch  XXIX.  "A  country  grows  rich  in  proportion  as  it  draws  gold  or 
money,  either  from  the  earth  or  from  other  countries ;  poor,  in  proportion  as 
money  leaves  it.  The  wealth  of  a  country  must  be  estimated  by  the  quan- 
tity of  gold  and  silver  in  it."  See  a  very  passionate  argument  against  this 
view  in  Boisguillebert,  Dissertation  sur  la  Nature  des  Richesses,  written  some- 
time between  1697  and  1714.  Berkeley,  Querist  (1735),  Nos.  562,  542.  Among 
Englishmen,  the  correct  view  was  prevalent  much  earlier,  especially 
among  the  founders  of  the  American  colonial  empire.  See  HacMttyt,  Voy- 
ages (1600),  III,  22  ft".  45  ft".  152  ff.  165  ft".  182  K  266  ft";  but  especially  the  work 


70  INTRODUCTION.  [Ch.  I 

SECTION  X. 

WEALTH.  — SIGNS  OF  NATIONAL  WEALTH. 

We  should  have  a  very  imperfect  idea  of  the  wealth  of  a 
people  (§  8)  if  we  should  estimate  it  at  the  value  in  exchange 

"Virginia's  Verger"  in  "Purchas  Pilgrims  "  (1625),  IV,  p.  S09  ft".  Howevei", 
several  Spaniards  vrere  led  by  hard  experience  to  adopt  a  view  opposed  to 
the  Midas-view  (compare  Aristotle,  Polit.  I,  ch.  3,  16),  by  which  the  first 
American  explorers  were  carried  away:  Garcilasso  de  la  Vega  (1609),  Com- 
ment, reales  II,  ch.  6;  Saavedra  Flixardo,  Idea  Principis  christian!  (1640) 
Sjmb.  69 :  potissimcB  diviticc  ac  opes  terrte  fructus  sunt,  ncc  ditiores  in  regnis 
fodincc,  quaiii  agricultitra;  plus  emoluiiieiiti,  acdivia  montis  Vesuvii laiera  adve- 
rujit,  quam  Potosus  mons.  Contemporary  with  those  Englishmen,  was  the 
Italian,  Giov.  Botero,  who  called  attention  to  the  fact,  that  France  and  Italy 
were  the  countries  of  Europe  richest  in  gold,  although  they  possessed  no 
mines  of  the  precious  metal  themselves:  Delia  Ragion  di  Stato  (1591)  p.  83 
ff.  Also  Sully,  who  called  agriculture  and  cattle-breeding  the  breasts  of  the 
state,  the  real  mines  and  pearls  of  Peru.  (Economics  royales  I,  ch.  Si.  See 
however,  II,  p.  3S1).  Montchr6ticn,  Traite  d'Economie  politique  (1615)  81, 
172  seq.  According  to  Sir  D.  NortKs  Discourses  upon  Trade,  1691,  wealth 
is  synonymous  with  freedom  from  want,  and  the  ability  to  procure  many 
comforts,  while  Temple  (ob.  1700,  Works  I,  140  seq.)  looks  entirely  at  the 
subjective  side  of  wealth.  Pollcxfcn,  "  England  and  East  India  inconsistent  in 
their  Manufactures"  (1697),  considers  gold  and  silver  as  the  only  real  wealth. 
To  this  definition  Davenant  (ob.  1714),  opposes  another.  Wealth,  according 
to  him,  is  whatever  places  prince  or  people  in  a  condition  of  superabund- 
ance, peace  and  security.  See  his  Works,  I,  p.  3S1  seq.  He  even  reckons 
intellectual  powers,  alliances  etc.,  among  the  national  wealth.  Compare  W. 
Reseller,  Zur  Geschichte  der  englischen  Volkswirthschaftslehre  1S51,  in  the 
acts  of  the  royal  Saxon  Academy  of  Sciences,  vol.  III.  Vauban  (Dime  royale 
1707),  Daire's  edition,  says:  "The  real  wealth  of  a  people  consists  in  an 
abundance  of  those  things,  the  use  of  which  is  so  necessary  to  sustain  the 
life  of  man,  that  they  cannot  at  all  be  dispensed  with."  By  the  wealth  of  a 
people  Galiani,  Delia  Moneta  II,  c.  2,  understands  the  aggregate  of  all  lands, 
houses,  movable  property,  money,  etc.  which  belong  to  them,  but,  that  the 
chief  element  of  wealth,  and  the  condition  precedent  of  all  others,  is  men 
themselves.  Hence,  the  process  of  the  impoverishment  of  a  people  in  their 
decline,  takes  the  following  course :  money  first  emigrates,  next,  population 
diminishes,  afterwards,  the  housos  fall  in  ruin,  finally,  the  land  itself  becomes 
n  waste.  According  to  Broggia,wQs.\t\i  is  nn  avanzoosia  valorcdi  tiitto  cio  clie 
avanza  al propria  consume  c  bisogno,  Delle  Monete,  1743,  IV,  307,  314;  Cust.) 
Paltnieri  {oh.    1794),  also  says:  il  superjluo  constitiiiscc  la  richezza.    (Publica 


Sec.  X.]  SIGNS  OF  NATIONAL  WEALTH.  71 

of  the  sum^-total  of  the  component  parts  of  the  national  re- 
sources. By  the  following  signs,  however,  an  approximative 
notion  of  the  value  in  use  of  the  resources  of  a  nation  may  be 
obtained : 

A.  When,  even  the  lower  classes,  who  compose  everywhere 
the  greatest  portion  of  the  people,  are  comfortable,  in  a  con- 
dition worthy  of  human  beings.  Thus,  C.  Dupin  is  surprised 
at  the  great  quantities  of  meat,  butter,  cheese  and  tea  entered 
on  the  accounts  of  the  poor-houses  in  England,  and  the  great 

Felicita.)  According  to  Turgot,  Sur  la  Formation  et  Distribution  des  Richesses 
1771,  §  90,  the  wealtli  of  a  nation  consists  in  the  net  proceeds  of  landed  prop- 
erty capitalized  at  the  ordinary  price  of  land,  and  then  of  the  aggregate  of  all 
the  movable  property  of  the  country.  BtlscJi,  Geluumlauf  III,  §  27,  consid- 
ers a  certain  duration  of  the  produce  or  revenue  as  an  essential  element  in 
the  idea  of  Avealth.  Lauderdale,  Inquiry,  ch.  II,  distinguishes  national 
wealth  and  private  wealth;  the  former  embracing  all  that  man  covets  as 
agreeable  or  desirable;  "while  it  is  one  of  the  mai^ks  of  the  latter,  that  there 
should  be  no  general  superfluity  of  it  on  hand.  Several  modern  English 
economists  call  wealth  only  that,  the  production  of  which  cost  human 
labor.  Thus,  Malthus,  Definitions  (1S27)  p.  234.  Torreiis,  Production  of 
Wealth,  1S21,  ch.  I.  When  Rossi,  Cours  d'Economie  politique,  1S35,  L. 
2,  says:  tout  chose  fropi-e  <l  satisfaire  aux  hcsoins  de  Vliomme  est  richesse,  he  de- 
monstrates how  the  frequent  inaccuracy  of  the  French  language  stands  in 
the  way  of  a  close  analysis.  The  greater  number  of  more  recent  definitions 
are  true  of  resources  rather  than  of  wealth.  Bastiat  distinguishes  between 
richcsse  effective  and  relative,  the  former  being  based  on  utility,  the  latter  on 
valeur.    (Harmonies,  ch.  6.) 

1  The  national  wealth  of  Athens,  at  the  time  of  the  hundredth  Olympiad,  is 
estimated  by  Bikkh  (Staatshaushalt  der  Athen,  I,  p.  636,  2d  ed.)  to  have  been 
from  thirty  to  forty  thousand  talents,  besides  the  non-taxable  property  of  the 
state.  That  of  Great  Britain  is  estimated  at  about  8,000  million  pounds  ster- 
ling. (Athenreum  5  March,  1S53.)  Woloxvski  estimated  that  of  France  at, 
at  least,  116  milliards  of  francs,  with  an  annual  increase  of  ij^  milliards. 
(L'or  et  I'Argent,  1S70.  EnquSte,  59.)  David  A.  Wells  estimated  that  of  the 
United  States,  in  1S60,  slaves  not  included,  at  14,183  million  dollars,  or  $451.20 
per  capita,  whefeas  in  England,  the  per  capita  wealth  was  about  $1,000. 
(Hildelirand's  Jahrh.,  1870,  I,  431.)  The  national  wealth  of  the  kingdom  of 
Saxony  is  equal  to  600  million  thalers  immovable,  and  600  million  movable, 
property.  {Engel,  Statist.  Zeitschr.  August,  1S56).  That  of  Wijrtemberg  == 
2,710  million  florins,  of  which  700  millions  represent  movable  goods,  and  100 
million,  claims  on  foreign  countries.  (Statistisches  Handbuch,  1863.)  Of 
course  all  these  estimates  are  very  inexact. 


72  INTRODUCTION.  [Cir.  I. 

care  taken  to  have  these  of  the  best  quality.^  A  good  symp- 
tom of  such  a  state  of  things  is  a  high  average  duration  of 
human  lite,  especially  when  there  is  a  relatively  large  number 
of  births.     (§  246.) 

B.  When  a  considerable  outlay,  devoted  to  the  satisfac- 
tion of  the  more  refined  wants,  is  voluntarily  made,  and  by 
those  only  possessed  of  a  proper  economic  sense.  Thus,  in 
England,  the  various  mission,  bible,  and  tract  societies  had, 
in  1841,  an  aggregate  income  of  £630,000.  The  expeditions 
in  search  of  Franklin  cost  over  a  million  pounds  sterling.  The 
state  outlay  also  belongs  to  this  category,  provided,  that  taxes 
are  collected  and  loans  obtained,  without  any  noticeable  op- 
pression. The  sum  of  20,000,000  pounds  sterling,  voted,  in 
1833,  by  the  British  Parliament  for  the  abolition  of  slavery,  is 
one  of  the  happiest  signs  of  the  national  wealth  of  England.^ 

C.  A  large  number  of  valuable  buildings,  and  permanent 
improvements ;  for  instance,  roads  of  every  description,  works 
for  purposes  of  irrigation  and  drainage.  Thus,  in  London, 
from  September,  1843,  to  September,  1845,  there  were  con- 
structed squares  and  streets  with  an  aggregate  length  of  ii.i 
geographical  miles.  The  number  of  newly  built  houses  in 
London,  between  1843  and  1847,  was  nearly  27,000.  And  so, 
in  England  and  Wales  there  are  492  geographical  miles  of 
navigable  canals,  while  their  navigable  rivers  are  estimated  to 
have  a  length  of  only  449  miles.  The  number  of  miles  of 
railroad,  in  the  British  Empire,  in  1865,  was  2,897  geographi- 
cal miles,  and  they  cost  459  million  of  pounds;  in  1870,  it  was 
3,270  geographical  miles,  at  an  aggregate  cost  of  650  millions 
sterling. 

D.  The  frequent  occurrence  of  heavy  commercial  payments, 
which  finds  expression  especially  in  the  magnitude  and  costli- 
ness of  the  most  usual  medium  of  exchange.  Thus,  all  pay- 
ments are  made  in  England  in  paper  (for  sums  of  at  least  five 


*  Ch.  Diiftn,  Forces  productives,  p.  82.     See  iiifra,  §  230. 

3  Compare  Meidingcr,  Das  britische  Reich  in  Europa,  pp.  79,  238,  261. 


Sec.  XL]  ECONOMY.  73 

pounds  sterling)  or  in  gold  coin.  Silver  is  used  only  as  small 
change,  like  copper  in  most  other  countries.  {Infra^  §  nSj 
seq.)* 

E.  Frequent  loans  to  foreign  nations.  Hence,  Storch  divides 
all  countries  into  borrowing  or  poor  countries,  loaning  or  rich 
countries,  and  independent  countries  which  hold  a  middle 
place  between  the  two  former.^ 


SECTION  XI. 

OF  ECONOMY  (HUSBANDRY). 

All  normal  economy^  (husbandry)  aims  at  securing  a  maxi- 
mum of  personal  advantage  with  a  minimum  of  cost  or  out- 
lay.^ And  there  are  always  two  intellectual  incentr\'es  at  the 
foundation  of  this  economy.  There  is,  first,  self-interest,  the 
positive  manifestation  of  which  is  the  effort  to  acquire  as  much 
of  the  world's  goods  as  possible,  and  the  negative  expression 
of  which,  the  eftbrt  to  lose  as  little  of  them  as  possible  —  ac- 
quisitiveness —  saving.  Self-interest,  losing  its  moral,  and  as- 
suming a  guilty,  character,  degenerates  into  egotism;  acquis- 
itiveness, into  covetousness ;  and  the  disposition  to  save,  into 
avarice  —  the  solifsisitius  of  Kant.  The  incentive  to  ameliorate 
one's  condition  is  common  to  all  men,  no  matter  how  varied 

* Davc/iant  considers  an  increase  in  the  number  of  houses,  ships  and  stocks 
of  goods,  as  the  surest  sign  of  an  increase  in  the  national  Avealth ;  and  on  the 
other  hand,  a  high  rate  of  interest,  a  low  price  of  land,  small  wages,  a  de- 
crease of  population,  and  an  increase  of  uncultivated  land,  as  the  signs  of 
national  impoverishment.  (Works,  I,  pp.  354,  seq.  II,  p.  2S3.)  Sir  M. 
Decker,  Essay  on  the  Causes  of  Decline  of  Foreign  Trade  (1744),  3,  gives  as  the 
signs  of  impoverishment,  the  following :  a  wretched  condition  of  the  poor 
and  of  manufactures,  a  low  price  of  wool,  long  credit  to  retail  dealers,  fre- 
quent cases  of  bankruptcy,  exportation  of  the  metals,  unfavorable  exchange, 
few  new  coins,  many  cases  of  unpaid  rent  of  leased  land,  and  high  poor  rates. 

^  StorcJi,  Ilandbuch,  I,  45.     Compare  infra,  §  1S7. 

'  On  the  difference  between  human  and  animal  economy,  see  Scl/ou,  Neue 
Untersuchungcn  der  N.  CEkonomie,  (1835),  4. 

» Compare  ScJiuJlc,  System,  III,  Aufl.  I,  2,  28. 


74  INTRODUCTION  [Cii.  I. 

the  form  or  different  the  intensity  of  its  manifestation.  It 
guides  us  all  from  the  cradle  to  the  grave.  It  may  be  re- 
stricted within  certain  limits,  but  never  entirely  extinguished. 
It  is,  in  the  domain  of  economy,  what  the  instinct  of  self-pres- 
ervation is  to  our  physical  existence,  a  powerful  principle  of 
creation,  preservation  and  of  renewed  life  (I.  Thessal.,  4,  ii, 
seq.).^  Then  there  is  the  incentive  of  the  demand  of  God's 
voice  within  us,  the  voice  of  conscience,  whether  we  call  it,  in 
philosophic  outline  "  the  adumbration  of  the  ideas  of  equity, 
right,  benevolence,  of  perfection  and  inner  freedom,"  or,  fram- 
ing our  lives  in  accordance  with  them,  the  striving  after  the 
Kingdom  of  God."*  It  matters  not,  how  much  the  image  of 
God  may  have  been  disfigured  in  most  men,  there  is  no  one 
in  whom  the  longing  for  it  has  so  far  disappeared  as  to  leave 
no  trace  behind.     This  puts  bounds  to  our  self-interest,  and 


^  Kiiics,  in  his  Polit.  ffikonomie  vom  geschichtl.  Standpunkte,  1S53,  p.  160 
fF.,  shows,  very  happily,  how  the  love  of  one's  self, — which  must,  indeed,  be 
distinguished  from  self-seeking  —  is  not  in  conflict  with  the  love  of  one's  neigh- 
bor; but  that,  in  healthy  natures,  it  is  found  allied  with  a  feeling  of  equity,  and 
of  the  common,  good.  See,  also,  F.  Fitoco,  Saggi  economici,  Pisa,  1825,  Nr. 
7.  ScJiutz,  Das  sittliche  Element  in  der  Volswirthschaft :  Tiibinger  Zeit- 
schrift  fiir  Staatswissensch.  1S44,  p.  132,  ft". 

*  "  That  they  should  seek  the  Lord  if  haply  they  might  feel  after  him." 
(Acts,  17,  27.  Compare  Matthew,  6:  33,  also  I.  Timothy,  5 :  8.)  Ada^n  Mailer 
in  his  Nothwendigkeit  einer  theolog.  Grundlagc,  49  seq.,  is  a  strong  advo- 
cate of  all  this,  but  a  rather  narrow  one.  The  farmer,  he  says,  should  first 
work  for  the  love  of  God,  then  for  the  fruit,  that  is,  for  the  gross  product, 
and  lastly  for  the  net  product.  His  work  is  a  trust.  Milllcr  considers  the 
business  relations  of  men,  as  they  exist  at  present,  as  "  the  comfortless  mu- 
tual slavery  of  all."  (Nothwendigkeit  einer  theolog.  Grundlage,  49  ff.)  The 
economist,  Ch.Perin,  who  writes  from  the  Catholic  politico-economical  stand- 
point, substitutes  for  conscience,  rcnonccment,  as  the  force  antagonistic  to 
intdret,  an  expression  inappropriate,  because  merely  negative,  although  in 
perfect  harmony  with  the  ascetic  religiousness  of  the  middle  ages.  (DeJa 
Richesse  dans  les  Societies  chr^tiennes,  1861,  II  vol.,  passim.)  Compare 
Roschcr  in  Gelzcr''s  Protestant.  Monatsblattem,  Jan.  1863.  PucJita,  Institu- 
tionen,  I,  f.  8,  opposes  to  individualism  —  or  the  impulse  to  distinguish  our- 
selves from  others,  and  which,  when  uncontrolled,  leads  to  egotism,  pride 
and  hate  —  love  and  right,  which  are  controlling  powers  over  the  former. 


Sec.  XI.]  ECONOMY.  75 

transmutes  it  into  an   earthly  means  to  enable  us  to  approxi- 
mate to  an  eternal  ideal. 

As,  in  the  structure  of  the  world,  the  apparently  opposing 
tendencies  of  the  centrifugal  and  centripetal  forces  produce 
the  harmony  of  the  spheres,  so,  in  the  social  hfe  of  man,  self- 
interest  and  conscience  produce  in  him  the  feeling  for  the  com- 
mon cfood.^  This  sentiment  of  the  common  interest  is  the 
foundation  on  which  rise  in  successive  gradation,  the  life  of 
the  fomily,  of  the  community,  of  the  nation  and  of  humanity, 
the  last  of  which  should  be  coincident  with  the  life  of  the 
Church.  It,  alone,  can  realize  the  kingdom  of  heaven  on  earth. 
Through  this  sentiment  alone  can  religion  be  made  active  and 
moral.  Only  through  it,  can  self-interest  be  made  really  sure 
and  always  to  the  purpose.  Even  the  most  calculating  mind 
must  acknowledge,  that  numberless  institutions,  relations  etc., 
are  useful  and  even  necessary  to  many  individuals,  which  can 
be  established  or  maintained  only  from  a  sense  of  the  general 
welfare,  for  the  reason  that  no  one  individual  could  make  the 
sacrifice  required  to  establish  or  maintain  them.  And  so,  since 
commerce  has  wrouMit  the  interests  of  all  men  into  one  irreat 
piece  of  net-work,  the  best  means  of  obtaining  wherewith  to 
satisfy  our  own  wants  is  to  help  others  satisfy  theirs.  Self- 
interest  causes  ever}^  one  to  choose  the  course  in  life  in  which 
he  shall  meet  witkthe  least  competition  and  the  most  abundant 
patronage;  in  other  words,  that  which  answers  to  the  most 
pressing  and  least  satislied  want  of  the  community.  As  a  rule, 
the  physician  w^ho  cures  the  greatest  number  of  patients  with 
the  greatest  skill,  and  the  manufacturer  who  produces  the 
best  goods  cheapest,  will'  grow  to  be  the  richest.  It  is,  more- 
over, easy  to  see  that,  according  as  the  circle  of  common  in- 
terests  grows   smaller,  it  approximates  to  self-interest;  and 

^  Even  the  ancients  conceived  Eros  as  a  Avorld-building  principle.  Accord- 
ing to  Sc//d>i^s  expression,  loc.  cit.,  which  it  is  not  difficult  to  misconstrue, 
the  feeling  of  the  common  interest  manifests  itself,  both  as  law  and  force. 
And,  in  reality,  it  is  necessary  that,  in  order  not  to  permit  the  droivsy  con- 


76  INTRODUCTION.  [Cn.  I, 

to  "  the  Kingdom  of  God  " '  as  it  grows  larger.  And  yet,  all 
these  circles  respectively  condition  one  another.  Cosmopol- 
itanism or  chmxh-zeal,  without  love  of  countiy;  patriotism, 
without  fidelity  to  the  community  in  which  one  lives,  or  love 
of  one's  family,  are  more  than  suspicious.  The  reverse  is 
also  true.  This  is  a  chief  connecting  link  between  the  great 
apparent  opposites.^  ^ 

science  to  fall  too  far  behind  self-interest,  -which  is  always  awake,  it  should 
create  lasting  institutions  and  regulations  above  and  beyond  the  caprice  of 
the  individual  or  of  the  moment;  for  instance,  in  the  family,  marriage,  educa- 
tion etc. 

^  The  more  private  interest  ceases  to  be  momentary,  and  becomes  life- 
longandeven  hereditary,  the  better  does  it  harmonize  with  the  feeling  of  the 
common  interest. 

^  Perin  says  (i,  93),  that  the  conflict  of  interest  is  reconciled  in  the  seeking 
for  the  attainment  of  the  supreme  good,  that  is  God,  "  who  gives  himself  to 
all  in  equal  measure,  and  yet  always  remains  the  same,  and  out  of  whose  ful- 
ness all  may  draw,  and  yet  no  one's  share  grows  less."  But  the  same  is  true 
of  all  ideal  goods,  and  of  every  fonfi  of  the  feeling  for  the  common  interest, 
the  highest  of  which  is,  indeed,  religiousness. 

8  According  to  Kant,  Anthropologie,  p.  239,  the  desire  of  comfort  and 
well-being,  and  the  inclination  to  virtue,  when  the  former  is  properly  re- 
strained by  the  latter,  produce  the  highest  degree  of  moi-al,  united  to  the 
highest  degree  of  physical,  good.  It  Is  well  known,  that  during  the  middle 
ages,  in  all  countries  except  Italy  and,  even  up  to  the  seventeenth  century, 
the  moral  sciences  were  under  a  one-sided  theological  influence,  whose  as- 
cetic condemnation  of  self-interest  may  have  been  well  enough  during  a 
period  of  violence.  By  virtue  of  a  very  natural  reaction,  and  as  a  protest  of 
individualism  against  the  constraint  of  absolute  monarchy,  the  materialists 
of  the  eighteenth  century  endeavored  to  discover,  even  in  the  most  exalted 
phenomena  of  human  society,  only  the  expression  of  an  enlightenod  self- 
interest.  See  Mandevillc's  Fable  of  the  Bees,  or  private  Vices  public  Vir- 
tues (1723),  but  especially,  Hclvdtius,  De  I'Esprit  (175S).  Voltaire  says,  that,' 
in  all  the  celebrated  maxims  of  De  Rochefoucauld  (1665)  there  is  but  one 
truth  contained,  ijiie  Vaiiiotii'  fropre  est  le  mobile  de  toutcs.  nos  actions.  (But 
see,  per  contra,  Pufcndorf  Jus  Naturrc  ct  Gentium,  1672,  II,  3,  15.)  This  ten- 
dency was  opposed,  especially  by  the  English,  who  could  not  be  blind  to  the 
influence  exerted  in  public  life  by  the  feeling  for  the  common  good.  David 
Hume,  Treatise  on  Human  Nature  (1739),  HI,  54,  is  of  opinion  that  the  in- 
terests of  others  are,  on  the  whole,  in  the  case  of  nearly  every  man  stronger 
than  even  his  own  self  interest.  Hutcheson,  System  of  Moral  Philosophy 
(^755)1  speaks  of  the  innate  principle  of  benevolence.     Man  is  not  a  perfect 


Sec.  XII.]  GRADES  OF  ECONOMY.  77 

SECTION  XII. 

ECONOMY.  — GRADES  OF  ECONOMY. 

Thanks  to  this  feeling  for  the  common  weal,  the  eternal  and 
destructive  war  —  the  hcUum  omnium  contra  omncs  —  which  an 
unscrupulous  self-interest  would  not  fail  to  generate  among 
men  engaged  in  the  isolated  prosecution  of  their  own  economic 
interests,  ceases  in  the  higher,  well-ordered  organization  ^  of 
society.  On  it  are  based  the  various  forms  of  economy  in 
common :  family-economy,  corporation  or  association-economy, 

•whole ;  a  part  belongs  to  his  own  person,  part  to  his  family,  part  to  the  na- 
tion, part  even  to  all  humanity.  Burke,  Inquiry  into  the  Origin  of  our  Ideas 
of  the  Sublime  and  Beautiful  (1756),  distinguishes  two  fundamental  prmciples 
of  action,  that  of  self-preservation  and  that  of  society.  On  the  former  is 
based  the  sense  of  the  sublime;  on  the  latter,  of  the  beautiful.  Accord- 
ing to  Ferguson^  History  of  Civil  Society,  (1767),  I,  3,  4,  the  "sense  of 
union"  is  frequently  strongest  where  the  advantage  drawn  from  the  con- 
nection is  smallest ;  for  instance,  it  is  weakest  in  highly  cultured  commercial 
countries.  Adam  Smith,  Theory  of  Moral  Sentiments  (176S),  has  been  as 
one-sided  in  reducing  everything  to  "sympathy,"  as  he  has  been  in  his 
Wealth  of  Nations  in  reducing  everything  to  "self-interest;"  but  not  with- 
out the  consciousness,  that  to  explain  the  reality,  it  is  necessary  to  take  both 
ihto  consideration  (Buckle).  It  would,  indeed,  be  just  as  preposterous  to 
base  economy  on  self-interest  alone,  as  to  base  marriage  merely  on  the  sexual 
appetite.  Recently,  Hermann,  Staatswirthschaftliche  Untersuchungen,  ist 
ed.,  part  ist,  discovers  in  self-interest,  and  in  the  feeling  for  the  common 
good,  the  two  springs  of  all  economy.  He  would  even  base  the  so-called 
theoretic  Political  Economy,  on  the  study  of  self-interest,  its  practice  in  that 
of  the  common  good.  M.  Chevalier,  Cours  d'Economie  politique,  1S44,  •'■•'^> 
412  ff.,  understands  something  very  like  this  by  the  contrast  between  liberty 
and  centralization.  The  antagonisme  and  aseodaiiojt  of  Bazard,  Exposition 
de  la  Doctrine  de  Saint  Simon  (1S29),  p.  144  if.  Closer  investigation  will 
show,  however,  that  self-interest,  which  must  not  be  confounded  with  egotism, 
and  the  common  interest,  are  neither  coordinate  nor  exhaustive  opposites. 
Compare  the  beautiful  contrast  drawn  by  Goethe  (Pocket  edition  of  1S33,  '^'ol 
46,  97),  between  "Pietat"  and  "  Egoisterei." 

^  Paul,  I.  Corinth.  12,  gives  the  most  beautiful  model  description  of  a  social 
organism.    Compare,  however,  the  fable  of  Menenius  Agrippa  in  Livy,  II,  32. 


78  INTRODUCTION.  [Ch.  I. 

municipal  economy,  and  national  economy.^  And  these  forms 
of  economy  in  common  are  so  essentially  the  condition  and 
complement  of  individual  economy,  that  the  latter,  without 
them,  could  either  not  be  maintained  at  all,  or,  at  least,  only  in 
the  very  lowest  stage  of  civilization. 

Although  the  higher  science  of  Political  Economy  has, 
nearly  always,  been  conceived^  as  treating  of  the  aggregate 
national  activity  of  a  people,  there  have  been  many,  recently, 
who  consider  Political  Economy  as  no  real  whole,  but  only  as 
a  mere  abstraction.  This  is  true,  especially  of  many  uncon- 
ditional free-trade  theorizers,  partly  from  a  repugnance  toward 
the  governmental  guardianship  of  private  businesses  or  econ- 
om}^  It  is  true,  also,  of  certain  philosophers  who  consider 
the  idea,  "  the  people,"  as  merely  nominal.^     There  are,  how- 

*  Excellent  beginnings  of  a  general  theory  of  economies  in  common  in 
Schdfflc^  N.  CEkonomie,  II,  Aufl.,  62  ff.,  331.  ff. 

^The  French  and  English,  with  their  strong  political  bias,  use  the  expres- 
sions respectively  economie  politique  and  Political  Economy.  In  Germany, 
Avhere  the  terms  the  people  (  Volk)  and  the  state  (Slant)  are  much  less  nearly 
coextensive,  the  Avords  Volks-Mirthschaft  and  ]Sl ationalokonomie  are  preferred. 
But  even  Hufeland,  who  first  gave  currency  to  the  term  Volks-virthschaft 
(Grundlegung,  I,  14),  called  attention  to  the  peculiarity  "  that  the  term  econ- 
omy suggests  that  there  is  one  who  economizes  and  guides,  an  economist  in 
chief,  and  that  such  a  one  is,  even  according  to  the  most  correct  opinion, 
wanting  in  the  public  economy  of  a  people. 

4  According  to  Th.  Cooper,  Lectures  on  the  Elements  of  Political  Economy, 
(1126),  I,  15  ff.  117,  the  wealth  of  society  is  nothing  but  the  aggregate  wealth 
of  all  the  individuals  that  compose  it.  Each  individual  looks  out  best  for  his 
own  interests,  and,  hence,  that  nation  must  be  the  richest,  in  which  each  indi- 
vidual is  most  completely  left  to  himself  (If  this  were  so,  savage  nations 
would  be  the  richest!)  Cooper  goes  so  far  as  to  disapprove  of  the  protection 
afforded  to  commerce  on  the  high  seas  by  a  national  navy ;  no  naval  war  is 
worth  what  it  costs,  and  merchants  should  protect  themselves.  He  says,  too, 
that  the  word  "  nation  "  is  an  invention  of  the  grammarians,  made  to  save 
the  trouble  of  circumlocution,  a  nonentity !  Adam  Smith  is,  as  might  be  ex- 
pected, far  removed  from  such  absurdities.  (Compare  Wealth  of  Nations,  IV, 
ch.  2,  and  the  end  of  the  fourth  book.)  But,  even  he  is  of  opinion  that  men, 
in  the  study  of  their  own  advantage  are  led  "  naturally,  or  rather  necessarily" 
(IV,  ch.  2),  to  the  employment  which  is  most  useful  to  society.  But  here 
Adam  Smith  overlooks  the  fact,  that  every  individual  nation  strives  after  earth- 


Sec.  XII.]  GRADES  OF  ECONOMY.  70 

ever,  two  things  necessary  to  warrant  us  to  call  a  thing  made 
up  of  a  number  of  parts,  one  real  whole :  the  parts  and  the 
whole  must  have  a  reciprocal  action  upon  one  another,  and  the 
whole,  as  such,  must  have  a  demonstrable  action  of  its  own. 
{Drobisc/i.)     In  this  sense,  "  the  people  "  is,  unquestionably,  a 

\y  immortality,  and  is,  in  consequence,  frequently  compelled  to  make  imme- 
diate sacrifices  for  the  sake  of  a  distant  future,  a  thing  -which  can  never  be 
to  the  private  interest  of  the  mortal  individuals  who  compose  it.  And  thus, 
D.  North,  Discourses  upon  Trade  (1691),  13  seq.,  says,  that  in  commercial 
matters,  different  nations  stand  in  precisely  the  same  relation  to  the  ^vhole 
•world,  that  individual  cities  do  to  the  kingdom,  and  individual  families  to 
the  city.  Similarl}-,  Boisguillchert,  Factum  de  la  France,  ch.  10,  327,  Daire's 
edition.  ^c///rtw/«  i^;-rt«Z-//«  (ob.  1790),  Political  Papers,  §  4.  And  J.B.Say\ 
Traite  d'  Economic  politique  (1S02)  I,  15 :  e\ery  nation  is,  in  relation  to  neigh- 
boring nations,  in  the  situation  of  a  province  in  relation  to  neighboring  pro- 
vinces. Unfortunately,  such  doctrine  is  only  too  palpably  refuted  by  every 
■war!  y.  Bcntham^s  saying:  Lcs  interets  Individ ucls  sont  Ics  sculs  iniereis 
rids  (Traite  de  Legislation,  I,  229).    Infra  §  98. 

Among  those  who,  in  antiquity,  most  energetically  maintained  that  the 
idea  of  national  economy  is  not  a  merely  nominal  one,  is  Plato  (De  Republ., 
IV,  420,  I,  462);  more  recently,  Fichte  (Der  geschlossene  Handelstaat,  iSoo), 
although,  in  general,  the  socialists  attach  as  little  importance  to  nationality  as 
their  most  decided  opponents.  Adam  Miiller  is  a  writer  who  deserves  recog- 
nition for  his  advocacy  of  national  economy,  and  of  the  state  as  a  whole,  par- 
amount to  individuals,  and  even  generations.  He  gives  war  the  credit  of 
causing  the  scientific  knovrledge  of  the  state  to  cast  deeper  roots,  and  of  en- 
lightening individuals  in  the  most  forcible  way,  that  they  are  parts  of  one 
great  whole.  (Elemente  der  Staatskunst,  1S09, 1,  7,  113).  He  calls  public  econ- 
omy, as  a  whole,  the  product  of  all  products.  W'hat,  he  inquires,  is  the  use  ot 
all  wealth,  if  it  does  not  guaranty  itself.^  And  this,  it  can  do,  only  through 
the  organization  of  the  whole  people,  that  is,  through  the  nation  (I,  202). 
■  Adam  SmiWs  theory  of  labor  would  be  correct  if  it  considered  the  entire  na- 
tional life  of  a  people  itself  as  one  huge  piece  of  labor.  (II,  265).  And  so, 
Miiller  directs  his  polemics  against  Adam  Smith's  premise  of  a  merely  mer- 
cantile world-market.  (II,  290).  Similarly,  the  protective  tarift"  theoreticians, 
t?cw;V7/,  Theorie  de  I'Economie  politique  (1S22),  II,  19S  fl".  and  Fr.  List,  Na- 
tionals System  der  politischen  Oek.  (1S42),  I,  2408'.  Colton,  Political  Econ- 
omy of  the  United  States,  1853.  Sismondi,  Nouveaux  Principes  (1819),  I, 
197,  ridicules  the  opinion  which  resolves  the  public  interest  into  merely  pri- 
vate interests :  It  is  A's  interest  to  rob  B ;  B,  the  weaker,  is  equally  inter- 
ested to  let  himself  be  robbed,  that  he  may  fare  no  worse.  But  the  state 
—  ?  ! 


80  INTRODUCTION.  [Ch.  I. 

reality,  and  not  alone  the  individuals  who  constitute  the  "  peo- 
ple." Besides,  it  is  truly  said  that  all  husbandry  or  economy 
supposes  a  will  ("systematized  activity"  etc.,  sufra^  §  2). 
Such  a  will  is  ascribed  to  individuals,  to  legal  persons,  to  the 
state,  but  not,  however,  to  "  the  people,"  as  a  whole.  But  this 
will  need  not  be  an  entirely  conscious  one,  as  is  plain  from  the 
case  of  the  less  gifted  and  less  cultured  individuals  engaged  in 
household  economy.  The  systemization  in  the  public  econr- 
omy  of  a  people  finds  its  clearest  expression  in  economic  laws, 
and  in  the  institutions  of  the  state.  But  it  finds  expression, 
also,  without  the  intervention  of  the  state,  in  the  laws  estab- 
lished by  use,  and  b}^  the  opinions  of  jurists  or  courts,  in  com- 
munity of  speech,  of  customs  and  tastes  etc.:  things  which 
have  an  important  economic  meaning,  which  depend  on  the 
common  nature  of  the  land,  of  race  and  history,  and  which 
influence  the  state,  at  least  as  much  as  they  are  influenced 
by  it.^  ^ 

The  most  that  can  be  said,  at  present,  so  far  as  an  economy 
of  mankind,  or  a  world-economy,  is  concerned,  is,  that  it  may 
be  shown  that  important  preparations  have  been  made  for  it. 
We  are  approaching  more  nearly  to  it  by  the  ways  of  the 
more  and  more  cosmopolitan  character  of  science,  the  increas- 
ing international  cooperation  of  labor,  the  improvement  in  the 
means  of  transportation,  growing  emigration,  the  greater  love 
of  peace,  and  the  greater  toleration  of  nations  etc. 

*  National  wars  are  really  no  inere  operations  of  the  will  of  the  state !  Since 
iSoo,  Ireland,  and,  since  1S58,  even  British  India,  constitute  one  state  with 
England,  and  yet  how  different  are  the  economic  tendencies  of  these  different 
countries  of  Avhich  the  individual  husbandman  or  business  man  must  take 
cognizance ! 

*  One  might  also  deny  the  reality  of  a  stream,  considered  as  a  whole,  since 
its  bed,  no  one  calls  a  stream,  and  its  watery  contents  change  every  moment. 
And  yet,  it  is  well  known  to  scientific  geography  that  every  stream  has  its 
own  individual  character. 


Sec.  XIII.]  THE  ECONOMIC  ORGANISM.  81 

SECTION  XIII. 

POLITICAL  ECONOMY.  — THE  ECONOMIC  ORGANISM. 

The  idea  conveyed  by  the  word  o)-gn)i/siu,  is  doubtless,  one 
of  the  most  obscure  of  all  ideas;  and  I  am  so  far  from  de- 
siring to  explain  ^  by  that  idea,  the  meaning  of  public  or  na- 
tional economy,  that  I  would  only  use  the  word  organism  as 
the  shortest  and  most  familiar  expression  of  a  number  of 
problems,  which  it  is  the  purpose  of  the  following  investiga- 
tion to  solve. 

There  are  two  points,  especially,  of  importance  here.  In  the 
motion  of  any  machine,  it  is  possible  to  distinguish  with  the 
utmost  accuracy,  between  the  cause  and  the  effect  of  the  mo- 
tion: the  blowing  of  the  wind,  for  instance,  is  simply  and  pure- 
ly, the  cause  of  the  friction  of  the  mill-stones  in  a  wind-mill, 
and  is  not  in  the  least  influenced  or  conditioned  by  the  latter. 
But,  in  the  public  economy  of  every  people,  patient  thought 
soon  shows  the  observer,  that  the  most  important  simultaneous 
events  or  phenomena  mutually  condition  one  another.  Thus, 
a  flourishing  state  of  agriculture  is  impossible  without  flourish- 
ing industries;  but,  conversely,  the  prosperity  of  the  latter 
supposes  the  prosperity  of  the  former,  as  a  condition  precedent. 
It  is  as  in  the  human  body.  The  motions  of  respiration  are 
produced  by  the  action  of  the  spinal  cord ;  and  the  spinal 
cord,  in  turn,  continues  to  work  only  through  the  blood,  that  is, 

'  This  would  be  to  be  guilty  of  explaining  igtiotnm  per  ignotiiis.  And  yQt, 
there  arc  a  great  many  modern  writers  who  imagine  that  they  have  said 
something  all-sufficient,  Avhen  they  have  told  us  that  the  state  is  an  organ- 
ism. As  early  a  writer  as  H iif eland  {^ .  Grundlegung,  I,  113),  enters  his  pro- 
test against  such  abuses.  The  person  who  would  operate  with  this  notion, 
should,  at  least,  have  read  the  acute  observations,  so  well  calculated  to  dissi- 
pate preconceived  opinions,  made  by  Lotze^  in  his  Allgemeine  Phy-siologie 
des  korperlichen  Lebens,  1-165.  The  organic  conception  of  national  life, 
the  life  of  a  whole  people,  Avliere  the  individual  organs  are  free  and  rational 
beings,  is  evidently  a  much  more  difficult  one  to  form  than  that  of  the 
animal  or  human  body. 

Vol.  I.— 6 


S3  THE  ECONOMIC  ORGANISM.  [Ch.  I 

by  the  help  of  resph'ation.  In  all  cases  like  this,  we  are  forced, 
when  accounting  for  phenomena,  to  move  about  in  a  circle,  un- 
less we  admit  the  existence  of  an  organic  life,  of  which  every 
individual  fact  is  only  the  manifestation.^  ■'' 

It  is,  also,  undeniable,  that  human  insight  into  the  operation 
and  utility  of  a  machine  must  always  precede  the  existence  of 
the  machine  itself.  This  human  insight  is  parent  to  the  plan, 
and  the  plan,  in  turn,  is  parent  to  the  machine.  The  very  re- 
verse of  this  is  true  in  the  case  of  organisms,  those  "  divine 
machines  "  as  Leibnitz  called  them.  Men  had  digested  food 
and  reproduced  their  kind,  thousands  of  years  before  physiol- 
ogists had  attained  to  a  true  theory  of  digestion  or  reproduc- 
tion. I  do  not,  indeed,  by  any  means,  pretend,  that  the  public 
economy  of  nations  is  governed  by  natural  necessity,  in  the 
same  degree,  as  for  instance,  the  human  body.  We  shall  find, 
however,  that  the  minute  arbitrary  variations  usual  here  and 
there  in  the  course  of  its  development,  generally  compensate 
for  one  another,  in  accordance  with  the  law  of  large  numbers. 
Here,  too,  we  find  harmonies,  frequently  of  wonderful  beauty, 
which  existed  long  before  any  one  dreamt  of  them ;  innumer- 

*  I  first  called  attention,  in  my  work  on  the  life-work  and  age  of  Thucydides, 
to  the  fact  that  that  great  historian  always  accounts  for  causes  in  the  follow- 
ing manner:  A.  is  produced  by  B.,  and  B.  by  A.  {Roschcr,  Leben  Work 
und  Zeitalter  des  Thukydides,  199  ft". ;  compare  especially  Thucyd.,  I,  3,  7,  seq.) 
Such  a  circle  is  not  a  vicious  one.  All  first  class  historians  have  thus  ex- 
plained historical  phenomena.  The  one-sided  deduction  of  A.  from  B.,  and 
B.  froin  C,  etc.,  which  the  so-called  pragmatic  writers  like  Polyhins,  for  in- 
stance, is  the  result  of  overlooking  all  recij^rocal  action.  Scialoja,  Principii 
(1840),  p.  60,  makes  a  somewhat  similar  observation  for  Political  Econoni}-. 

2  Whether  we  call  the  unknown  and  inexplicable  ground  back  of  all  analy- 
sis, and  which  our  analysis  cannot  reach,  vital  force,  generic  form,  spirit  of 
the  nation,  or  God's  thought,  is  for  the  present  a  matter  of  scientific  indifter- 
cnce.  All  the  more  necessary  are  the  self-knowledge  and  honesty,  in  gen- 
eral, which  admit  the  existence  of  this  background,  and  which  do  not,  by 
denying  it,  deny  the  connection  of  the  whole,  which  is,  for  the  most  part, 
much  more  important  than  the  analyzed  parts.  But  I  must  at  the  same  time, 
enter  my  energetic  protest  against  the  imputations  of  heresy  made  by  those 
who  do  not  comprehend  the  sacred  duty  of  science,  by  never  ceasing  investi- 
gation, to  push  farther  back  the  bounds  of  this  inexplicable  background. 


Sec.     XIII.]  THE  ECONOMIC  ORGANISM.  83 

able  natural  lavjs^  whose  operation  does  not  depend  on  their 
recognition  by  individuals,  and,  over  which,  only  he  can  ob- 
tain power  who  has  learned  to  obey  them.     (^Bacon.)  ^  "^ ''     But 

*When  Ilildebrand,  for  instance,  objects  to  the  application  of  the  expres- 
sion "  natural  law "  to  the  economic  actions  of  man,  for  the  reason  that  it 
conflicts  with  human  freedom  and  man's  capacity  for  progress  ( Jahrbiicher 
derN.  CEek.  und  Statistik.,  1863,  Heft.,  I),  I  cannot  agree  with  him.  I  use  the 
expression  "  natural  law "  wherever  I  observe  uniformity,  explicable  in  its 
broader  connections,  and  not  dependent  on  human  design.  That  there  are 
such  uniformities  there  can  be  no  question.  I  need  only  mention  the  philo- 
logical law  of  the  so-called  "permutation  of  consonants,"  which  individuals 
follow  when  speaking — certainly  not  through  compulsion, —  and,  by  means 
of  which,  the  progress  of  the  speaking  aggregate  is  made  manifest.  Or,  I 
might  call  attention  to  the  well  known  fact,  that,  in  populous  countries  mar- 
riages and  crimes,  which  are  for  the  most  part  free,  are  divided  among  the 
different  age-classes  in  a  proportion  much  more  uniform,  fi-om  year  to  year, 
than  are  deaths,  which  are  not  free.  I  adhere  all  the  more  firmly  to  the  ex- 
pression "  natural  law,"  because  no  one  takes  offense  at  or  objects  to  the  ex- 
pression, "  nature  of  the  human  soul."  But  to  this  very  nature  of  the  human 
soul  belong  the  freedom  and  responsibility  of  the  individual,  as  well  as  the 
capacity  of  the  species  for  progress.  Compare  A.  Wagner,  on  Law  in  the 
Apparently  capricious  Actions  of  !Man  {Die  Gesetzindssigkcit  hi  den  scheinhar 
tvzllkiirlichen  mejisclilicjicn  Handhtngcn^  1864,  p.  63  seq.),  in  which,  how- 
ever, he  only  goes  so  far  as  to  show  that  law  and  freedom  coexist  side  by 
side  as  indubitable  facts,  while  the  seeming  contradiction  between  the  two 
remains.  DrobiscKs  Moralische  Statistik  und  die  menschliche  Willensfrei- 
heit,  1867,  is  an  important  contribution  to  the  literature  of  this  question. 

^Whately^  in  his  fourth  lecture  (Lectures,  1831),  shows  in  a  very  clear  way, 
Jiow  London  is  supplied  and  provisioned  by  men  with  no  object  in  view  but 
their  own  personal  interest,  each  of  whom  is  possessed  of  but  a  very  limited 
knowledge  of  the  aggregate  wants  of  its  inhabitants,  and  yet  they  work  into 
one  another's  hands,  in  the  interests  of  the  whole,  purely  instinctively,  and 
infinitely  better,  perhaps,  than  the  operations  of  the  most  skillful  governmental 
commission,  organized  for  the  same  purpose. 

6  Alphonsus  of  Castile,  the  king  astrologer  of  the  thirteenth  century,  is 
reported  to  have  said,  that  the  universe  would  have  been  much  better  consti- 
tuted, if  the  Creator  had  asked  his  advice  beforehand.  Astronomers  like 
Newton  and  Gauss  have,  certainly,  judged  otherwise. 

"•  MacCulloch  remarks,  that  there  is  an  essential  difterence  between  the  phys- 
ical and  the  moral  and  political  sciences  in  this,  that  the  principles  of  the  form- 
er apply  in  all  cases,  those  of  the  latter,  only  in  the  greater  number  of  cases  — 
a  thought  very  ably  developed  by  K)ties,\oc.  cit.,  fasst'in.  If,  with  N'e-i'inarcl:, 
(London  Statistical  Journal,  1S61,  p.  460  seq.),  wc  could  gi"ant,  that  there  is  no 


84  INTRODUCTION.  [Ch.  I. 

it  should  never  be  lost  sight  of,  that  the  natural  laws  govern- 
ing the  public  economy  of  a  people,  like  those  of  the  human 
mind,  are  distinguished  in  one  very  essential  point  from  those 
of  the  material  world.  They  have  to  do  with  free  rational  be- 
ings, who,  because  they  are  thus  free  and  rational,  are  respon- 
sible to  God  and  their  conscience,  and  constitute  in  their  ag- 
gregate a  species  capable  of  progress. 


SECTION  XIV. 

ORIGIN  OF  A  NATION'S  ECONOMY. 

The  public  economy  of  a  people  has  its  origin  simultane- 
ously with  the  people.  It  is  neither  the  invention  of  man  nor 
the  revelation  of  God.  It  is  the  natural  product  of  the  facul- 
ties and  propensities  which  make  man  man.^  Just  as  it  may 
be  shown,  that  the  family  which  lives  isolated  from  all  others, 
contains,  in  itself,  the  germs  of  all  political  organization,'^  so 
may  it  be  demonstrated,  that  every  independent  household 
management  contains  the  germs  of  all  politico-economical 
activity.  The  public  economy  of  a  nation  gi'ows  with  the 
nation.  With  the  nation,  it  blooms  and  ripens.  Its  season 
of  blossoming  and  of  maturity  is  the  period  of  its  greatest 
strength,  and,  at  the  same  time,  of  the  most  perfect  develop- 

"  law,"  except  where  it  is  possible  to  predict  each  individual  occurrence  under 
it,  there  would  be  no  such  thing  even  as  the  "  laws  "  of  the  probability  of  life. 
The  word  "  element,"  also,  means  something  very  different  in  Political  Econ- 
omy from  Avhat  it  does  in  chemistry:  a  combination  which  might  be  broken 
up,  but  which  that  science  leaves  it  to  other  sciences  to  do.  The  "element" 
of  Political  Economy  is  Man.  Compare  Ptckford,  Einleitung  in  die  poli- 
tische  CEk.,  iS6o,  17. 

•  It  is  in  this  sense  that  Aristotle  (Polit.,  I,  p.  i,  9  Schn.)  says:  (po.V£pbv^ 
ore  Tcou  <puaec  3y  iiohz  iffvc,  xac  ore  dvd^pcono^  (puaec  nohrcxbv  ^coov. 
According  to  L.  Sta'tt,  Lchrhuch  dcr  Volks-wirtlischaft,  1S58,  33,  the  political 
economy  of  a  people  begins  at  the  point  where  the  overplus  of  individuals 
begins. 

*  Compare  K.  L.  von  Holler.,  Restauration  der  Staatswissenchaft,  I,  p. 
446  ff. 


Sec.  XV.]        DISEASES  OF  THE  SOCIAL  ORGANISM.  85 

ment  of  all  its  more  important  organs.^  In  respect  to  it,  the 
economic  endeavors  of  any  epoch  ma}'  be  said  to  be  repre- 
sented by  two  great  parties,  the  one  progressive,  the  other, 
conservative.  The  former  would  hasten  the  period  of  the  na- 
tion's richest  and  most  varied  development,  the  latter  postpone 
its  departure  as  long  as  possible ;  and  hence  it  comes,  that  a 
people's  economic  decline  is  sometimes  taken  for  progress,  by 
the  former  class,  and  their  progress  for  decline,  by  the  latter. 
As  a  rule,  the  union  and  equilibrium  of  these  parties  are  wont 
to  be  the  greatest  at  the  period  of  maturity,  because,  then,  in- 
telligence and  the  spirit  of  sacrifice  for  the  common  good  are 
most  general.'* 

Finally,  the  public  economy  of  a  nation  declines  with  the 
people.     {Itifra,  §  263  ff.) 

SECTION  XV. 

DISEASES  OF  THE  SOCIAL  ORGANISM. 

If  the  public  economy  of  a  people  be  an  organism,  we  must 
expect  to  find  that  the  perturbations,  which  afiect  it,  present 
some  analogies  to  the  diseases  of  the  body  physical.  We 
may,  therefore,  hope  to  learn  much  that  may  be  of  use  in 

'  As  Sallust  characterizes  the  political  apogee  of  the  Romans :  Ofthnis 
moribus  et  maxima  Concordia  egit  fopuliis  Romanus  inter  secundum  atque  fos- 
tremum  bellum  Carthaginiensc^  See  Aug-ustin  (Civ.  Dei  II,  iS).  Puclita 
(Institutionen,  I,  f.  S3),  with  a  great  deal  of  good  sense,  distinguishes  in  every 
people  their  individual  character  from  that  which  they  share  in  common  with 
all  mankind.  The  latter  exists  among  savage  nations,  only  as  a  germ  buried 
under  the  overpowering  weight  of  that  which  is  special  to  them.  The  pe- 
riod of  the  perfect  equilibrium  of  both  elements  is  coincident  with  that  of  a 
people's  real  culture.  In  the  further  course  of  development,  the  latter,  more 
general  element  becomes  gradually  over-powerful,  destroys  the  individual, 
and  thus  dissolves  nationality. 

<Thus  formulated,  the  principles  of  the  two  great  parties,  evidently,  no 
more  contradict  one  another  than  their  ordinary  watchwords,  "  freedom " 
and  "order,"  are  in  contrast  with  one  another.  Hence  all  the  great  states- 
men of  the  best  periods  of  history  have  adopted  the  middle  course  rec- 
ommended by  Aristotle. 


36  INTRODUCTION.  [Ch.  I. 

practice,  from  the  tried  methods  of  medicine.^  In  the  diseases 
of  the  body  economic,  it  is  necessary  to  distinguish  accurately, 
between  the  nature  of  the  disease  and  its  external  symptoms, 
although  it  may  be  necessary  to  combat  the  latter  directly, 
and  not  merely  with  a  view  to  alleviation.  Following  the 
example  of  the  physician,  we  should  particularly  direct  our 
attention  to  the  curative  method  which  nature  itself  would 
pursue,  were  art  not  to  intervene.  "  The  curative  power  of 
nature  is  no  peculiar  power;  it  is  the  result  of  a  series  of  happy 
adjustments,  b}^  means  of  which  the  morbid  perturbation  itself 
sets  in  motion  the  springs  which  may  either  destroy  the  evil 
or  paralyze  its  action.  It  is,  in  fact,  nothing  but  the  original 
power  which  formed  the  body  and  preserves  its  life  in  contact 
with  the  external  causes  of  perturbation  and  the  internal  dis- 
order provoked  by  these  causes."     {Rziete.) 

1  See  Lotze,  AUgemeine  Pathologic,  1842.  Ruete,  Lehrbuch  der  allgemein- 
en  Therapie,  1852.  These  analogies,  obviously,  should  not  be  pushed  too  far. 
One  of  the  most  essential  differences  between  the  two  consists  in  this,  that 
in  the  diseases  of  the  body  politic,  physicians  and  nurses  are  themselves  part 
of  the  diseased  organism. 


Sec.  XVI.]     POLITICAL  OR  NATIONAL  ECONOMY.  87 


CHAPTER  II. 

POSITION    OF    POLITICAL    ECONOMY    IN 
THE  CIRCLE  OF  RELATED  SCIENCES. 


SECTION  XVI. 

POLITICAL  OR  NATIONAL  ECONOMY. 

By  the  science  of  national/  or  Political  Economy,  we  under- 
stand the  science  which  has  to  do  with  the  laws  of  the  devel- 
opment of  the  economy  of  a  nation,  or  with  its  economic  na- 
tional life.     (Philosophy  of  the  history  of  Politicrl  Economy, 

'  See  Ahroi's  very  beautiful  exposition,  Organische  Staatslehre,  1S50,  I,  77. 
National  economy  (^National'6konomieT=^-^v^Y\c  economy);  national  econo- 
mics ('AWzbw^/J/.'cJwow/'/-  =  the  science  of  public  economy.  The  latter  term 
was  first  proposed,  in  Germany,  in  1S49,  by  Uhde;  the  former  was  naturalized 
there  in  1S05:  v.  Soden,  Nationalokonomie,  1S05;  Jacobs  Grundslitze  dcr  N. 
CEk.,  1806.  In  Italy,  G.  Ortes  used  it  as  early  as  1774,  in  his  Dell  Economia 
nazionale,  and  in  England  it  was  employed,  even  in  1867,  by  Ferguson,  His- 
tory of  Civil  Society,  III,  p.  4.  Holland.  Volkshuyshoudkunde.  As  a  rule, 
outside  of  Germany,  the  term  political  economy,  dconoinie  poli/iquc,  one  which 
is.  somewhat  calculated  to  mislead  the  student,  is  used.  (Thus  Alontchri- 
ticn  sieiir  de  Vatteville,  Traite  de  1'  Economic  politique,  165;  later  5^.  J.  Rous- 
seau, Discours  sur  1'  Economic  politique,  later  yet  the  Traites  d'  E.  p.,  Mail- 
lardcre.  Page  and  J.  B.  Say,  1801-1803).  Political  Economy  {Sir  y.  Siezmrf, 
Inquiry  into  the  principles  of  P.  E.,  1767);  also  Public  Economy  {Petty,  sev- 
eral Essays,  1682,  35);  Economia  politica  or  fuhblica  (the  latter  by  Vcrri  and 
Beccaria).  The  title  Economia  civile  {Genovesi,  Lezioni,  d'  Ec.  civ.,  1769),  has 
found  few  adherents.  It  has,  however,  been  used  recently  by  CcrnuscM: 
Illusions  des  Societes  cooperatrices  (1866).  The  term,  Econoiuic  socialc  has 
been  used  all  the  more  in  France  (Dunoyer,  Nouveau  Traits  d'  Ec  see,  1S30), 
since  recominendcd  by  y.  B.  Say,  and  employed  by  Buat  (Des  vrais  Prin- 
cipes  de  1'  Origine  et  de  la  Filiation  du  Mot  Economic  politique,  in  the  Jour- 
nal des  Economistes,  1852.) 


88  INTRODUCTION.  [Ch.  II. 

according  to  von  Mangoldt.)  Like  all  the  political  sciences,  or 
sciences  of  national  I[fe,  it  is  concerned,  on  the  one  hand,  with 
the  consideration  of  the  individual  man,  and  on  the  other,  it 
extends  its  investigations  to  the  whole  of  human  kind.^ 

National  life,  like  all  life,  is  a  whole,  the  various  phenomena 
of  which  are  most  intimately  connected  with  one  another. 
Hence  it  is,  that  to  understand  one  side  of  it  scientifically,  it  is 
necessary  to  know  all  its  sides.  But,  especiall}^  is  it  necessary 
to  fix  one's  attention  on  the  following  seven:  language,  relig- 
ion, art,  science,  law,  the  state  and  econom}^^  Without  lan- 
guage, all  higher  mental  activity  is  unthinkable ;  without  re- 
ligion, all  else  would  lose  its  firmest  foundation  and  highest 
aim.  Through  art,  alone,  do  all  these  sides  attain  to  beauty; 
through  science,  alone,  to  clearness.  Law  arises,  the  moment 
conflicts  of  will  become  inevitable  and  an  adjustment  is  desired. 
The  state  has  to  do  with  them,  in  so  far  as  they  have  sxiy  ex- 
ternal force  or  validit3\  Indeed,  there  is  no  human  relation, 
not  even  the  highest  and  the  sweetest,  but  has  its  economic 
interests.  It  is,  therefore,  natural,  that  each  of  the  sciences 
which  relate  to  these  various  regions  of  human  life  should,  in 
part,  presuppose  all  others,  and,  in  part,  serve  as  a  basis  for 
them.* 


-iSte"/',  Lehrbuck  der  V.  W.,  prefaces  his  "Science  of  Public  Economy" 
(pp.  329-35S),  by  a  "  Science  of  Economy  "  (pp.  96-328),  Avhicli,  however,  treats 
individual  economies  only  as  the  elements  of  the  national  economy.  A  sci- 
ence of  household  or  isolated  individual  economy  could,  of  course,  treat  only 
of  the  economic  relations  of  anchorites.  Those  who  object  that  Political 
Economy  is  not  a  real  whole  Avill  be  satisfied  with  the  definition  of  it  given 
h\  F.  I.  Netimanii:  "The  Science  of  the  bearing  of  household  or  separate 
economies  to  one  another,  and  to  the  state  as  a  whole."  (Tub.Zeitschr.,  1S72, 
267.) 

3  In  so  far  as  these  various  institutions  are  concerned,  with  objects  beyond 
the  human,  or  supernatural,  only  the  manner  in  which  they  are  accepted,  or 
in  which  they  are  made  use  of,  is  an  expression  of  national  life. 

■*  Thus,  J.  Tucker  thinks  that  religion,  the  state  and  commerce,  are  only 
the  parts  of  one  same  general  plan :  no  institution,  therefore,  can  be  called 
appropriate,  within  the  limits  of  the  province  of  any  one  of  these,  if  it  be 
clearly  in  opposition  to  the  other  two,  because  the  harmony  of  God's  work 


Sec.  XVI.]       POLITICAL  OR  NATIONAL  ECONOMY.  89 

But  in  the  midst  of  this  universal  relationship,  it  is  easy  to 
see  that  law,  the  state  and  economy  constitute  a  family,  as 
it  were  apart  and  more  closely  connected.  (The  social  sci- 
ences, in  the  narrower  sense  of  the  expression.) 

They  are  coniined  almost  exclusively  to  what  Schleiermacher 
has  called  "  eirecti\-e  action  "  {zvirksaiue  Ilaiidcln),  while  art  and. 
science  belong  almost  entirely  to  the  "action  of  representa- 
tion" {darstcUcudcn  IIandehi)\  and  religion  and  language 
combine  both  kinds.  Law,  the  state,  and  economy  too,  have 
their  roots  so  deep  in  the  physical  and  intellectual  imperfec- 
tion of  man,  that  we  can  scarcely  imagine  their  continuance 
beyond  his  life  on  earth  (Gospel  of  Matthew,  22,  30).  But 
within  these  limits,  their  several  provinces  and  the  subjects 
with  Avhich  they  are  concerned  are  almost  coincident.  They 
only  consider  these  from  different  points  of  view:  the  science 
of  politics  from  that  of  sovereignty;  the  science  of  Political 
Economy  from  that  of  the  satisfaction  of  the  requirement  of 
external  goods  by  the  people ;  the  science  of  law  from  that  of 
the  prevention  or  the  peaceable  adjustment  of  conflicts  of  will. 
As  every  economic  act,  consciously  or  unconsciously,  supposes 
forms  of  law,  so,  by  far  the  greater  number  of  the  laws  re- 
lating to  rights,  and  the  greater  number  of  judgments  in  the 
matter  of  rights,  contain  an  economic  element.  In  numberless 
cases,  the  science  of  law  gives  us  only  the  external  hoiv;  the 
deeper  vjhy  is  revealed  to  us  by  the  science  of  Political  Econ- 
omy.^ "     And,  as  to  the  state,  who,  for  instance,  can  appreciate 


oan  not  be  broken  up.     (Four  Tracts  and  two  Sermons  on  political  and  com- 
mercial Subjects,  1774,  Serm.  I.) 

^  Riedcl  (National  QEkonomie,  1838^  I,  p.  178  scq.),  gives  a  good  illustration 
of  the  difference  between  the  manner  in  wliich  law  and  Political  Economy 
look  at  the  same  question.  The  law  (to  avoid  strife,  or  to  settle  controvei-sies) 
looks  upon  the  debtor  as  the  owner  of  the  capital,  and  lets  him  run  all  the 
risk;  Political  Economy,  on  the  other  hand,  looking  deeper  into  the  nature 
of  the  contract,  reaches  an  entirely  opposite  result.  The  mere  jurist  has  a 
dangerous  tendency  to  undervalue  the  reign  of  the  laws  of  nature ;  the  mere 
political  economist,  just  as  readily,  undervalues  the  element  of  free  will. 
{Arnold,  Cultur  und  Recht  I,  97.)     In  this  respect,  the  two  sciences  complc- 


90  INTRODL'CTION.  [Ch.  II. 

the  political  significance  of  a  nobilit}^,  without  understanding 
the  economic  character  of  rent,  and  of  the  possession  of  large 
landed  estates?  Who  can  politically  appreciate  the  inferior 
classes  of  society,  unless  initiated  into  a  knowledge  of  the  laws 
that  govern  wages  and  population?  It  were  much  easier  to 
cultivate  ps3^chology  without  physiology!  "The  state  is 
society  protected  by  force  "  {Hcrharf).  There  are  two  bases 
to  all  material  power:'''  wealth  and  warlike  ability  {yjrjixaza  — 
vauvr/d,  according  to  Thucydides);  and  how  much  the  latter 
has  need  of  the  former  is  well  expressed  by  the  familiar  say- 
ing of  Montecuccoli:  "  Money  is  not  only  the  firsts  but  the 
second  and  third  condition  of  war."  ^ 

Frederick  the  Great  calls  finance  the  pulse  of  the  state, 
and  Richelieu,  the  point  of  support  which  Archimedes  was  in 
search  of,  to  move  the  world.  In  all  modern  nations,  the  his- 
tory of  the  debates  on  the  raising  of  revenue  and  of  the  passing 
of  budgets  is,  at  the  same  time,  the  history  of  parliamentary 
life;  and  most  great  revolutions,  the  Reformation  of  the  six- 
teenth century  not  excepted,  if  not  caused  have  been  promoted, 
by  financial  embarassment. 

ment  each  other  very  well.  Roesler  (Htldedrand^s  Jahrh.,  iS6S,  II,  and  1S69, 
I.)  shows,  and  he  does  not  exaggerate  the  fact,  that  political  economists  have 
piade  altogether  too  little  use  of  the  results  of  the  science  of  law. 

*  Jurists  will  always  experience  the  want  of  divesting  their  isolated  ideas  ot 
their  purely  accidental  character,  by  grouping  them  together  in  such  a  man- 
ner as  to  make  them  constitute  a  complete  and  independent  whole.  One 
must  be  possessed  of  profound  knowledge  to  perceive  their  necessary  con- 
nection from  an  historico-juridical  point  of  view.  Political  Economy,  with 
its  characteristic  accuracy  and  practical  utility,  can  best  take  its  place,  at  the 
present  time.  It  is  in  the  greater  number  of  legal  questions,  the  systematic- 
ally elaborated  science  of  "  the  nature  of  the  thing."  See  the  able  beginnings 
of  a  policy  of  legislation  and  higher  history  of  law,  based  on  Political  Econ- 
omy, by  H.  Danlitvardt :  N.  CEk.  und  Jurisprudenz,  3  Hefte,  1S57,  and  my 
preface    to   DankvjardCs   Nationalokonomisch-civilistischen   Studien,  iS62_ 

'  The  intellectual  power  of  a  people  depends  upon  the  vigorous  and  har- 
monious development  of  all  seven  spheres  of  life. 

^Montecuccoli^  Besondere  und  geheime  Kriegsnachrichten  (Leipzig,  1736). 
A  very  similar  judgment  by  Csesar  in  Dio  Cass.,  XLII,  49. 


Sec.  XVII.]      SCIENCES  RELATING  TO  NATIONAL  LIFE.     01 


SECTION  XVII. 

SCIENCES  RELATING  TO   NATIONAL   LIFE.  — THE  SCIENCE 
OF  PUBLIC  ECONOMY.  — THE  SCIENCE  OF  FINANCE. 

If,  by  the  public  economy  of  a  nation,  \vc  understand  eco- 
nomic legislation  and  the  govermental  guidance  or  direction 
of  the  economy  of  private  persons,'  the  science  of  public  econ- 
omy becomes,  so  far  as  its  form  is  concerned,  a  branch  of 
political  science,  while  as  to  its  matter,  its  subject  is  almost  co- 
incident with  that  of  Political  Economy.  Hence  it  is,  that  so 
many  writers  use  the  terms  public  economy,  or  the  economy 
of  the  state  {Staatszuirthschaft\  and  National  Economy  (  Volks- 
wirthschaft ),  as  synonymous.^  The  h}^^othesis,  in  accordance 
with  which,  this  science  should  discard  aU  consideration  of  the 
state,  or  should  refuse  to  presuppose  its  formation,^  would  lead 
us  into  an  ideal  region,  diiFicult  to  define,  probably  entirely  im- 
possible, and  inaccessible  to  experience. 

Just  as  clear,  is  the  close  connection  between  politics  and 
and  Political  Economy,  in  the  case  of  the  science  of  finance,  or 
of  the  science  of  governmental  house-keeping,  otherwise  the 
administration  of  public  affairs.  The  latter,  evidently,  so  far 
as  its  end  is  concerned,  belongs  to  politics,  but  so  far  as  the 
means  to  that  end  are  concerned,  to  National  Economy.  As" 
the  physiologist  cannot  understand  the  action  of  the  human 
bod}^,  without  understanding  that  of  the  head ;  so  we  would 
not  be  able  to  grasp  the  organic  whole  of  national  economy,  if 
we  were  to  leave  the  state,  the  greatest  economy  of  all,  the 

^  Biilan,  Handbuch  der  Staatswirthschatt^lchre,  1S3V 

-^Thviiv.  Justi,  Staatswirthschaf't  1755.  Ki-aus,  Staatsvvirthschaft,  pub- 
lished by  Auerswald,  i^'$>;  Schmtilz,  Handbuch  der  Staatswirthschaft,  iSoS. 
More  recently,  Hcniiamt,  Staatswirthschaftliche  Untersuchungcn,  1S32.  In 
France,  the  expression  6co7iomie  de  Vela/,  is  very  seldom  used.  Gavard, 
Principes  del'E.  d'Etat,  1796. 

s  Politz,  Staatswissenschaftcn  im  Lichte  unserer  Zeit„II,  3.  Compare  Lotz^ 
Handbuch  der  Staatswirthschaft  (2d  ed.,  1S37),  I,  10  ft". 


92  INTRODUCTION.  [Ch.  II. 

one  which  uninterruptedly  and  irresistibly  acts  on  all  others, 
out  of  consideration.* 

By  the  term  folicc^  we  mean  the  state  power  whose  office  it 
is,  without  mediation,  to  prevent  all  disturbances  of  external  or- 
der among  the  people.^  It  may  extend  its  action  into  all  the 
domains  of  national  life  mentioned  above,  whenever  external 
order  is  there  threatened,  or  calls  for  protection ;  but  its  action  is 
important  especially  in  the  domains  of  law  and  economy.  The 
science  of  the  -poUcc  -pozucr^  therefore,  of  all  those  doctrines 
resulting  from  investigation  into  national  life,  takes  up  only 
one  phase  of  each  of  them ;  and  the  phases  of  doctrine  thus 
taken  up,  it  combines  into  a  whole,  for  practical  ends.  Its  rela- 
tion to  those  sciences  is  like  that  of  surgery  to  the  medical  sci- 
ences, or  like  the  science  of  legal  procedure  to  the  science  of 
law. 

^Our  view  of  Political  Economy  holds  a  rniddle  place  between  opposed  ex- 
tremes. The  view  expressed  by  Whately^  Lectures  on  Political  Economy 
(1831),  No.  I,  and  covered  by  the  proposed  term  "  catalactics,"  is  by  far  too 
narrow.  Similarly,  Macleod^  Elements  of  Political  Economy,  1858,  I,  11. 
A  like  objection  may  be  raised  to  the  earlier  title  of  Prifz-wltz's  book :  Die 
Kunst  reich  zuwerden, —  the  art  of  growing  rich.  On  the  other  hand,  Dun- 
oyer,  Liberte  du  Travail  (1845),  L.  IX,  ch.  I,  goes  too  far  altogether:  "not 
only  in  what  manner  a  nation  grows  rich,  but  according  to  what  laws  it  best 
succeeds,  in  the  execution  of  all  its  functions."  And  so  SforcJi,  Handbuch, 
translated  into  German  by  Rau,  I,  9.  Many  modern  writers  define  Polit- 
ical Economy  simply  as  the  theory  of  society ;  for  instance,  Sctaloja,  Principj. 
dell'Economia  sociale,  1840.     Cibrario,  E.  polit.  del  medio  Evo,  III,  1S42. 

5  For  the  many  and  various  definitions  of  the  police  power,  see  von  Berg, 
Handbuch  des  Polezeirechts,  I,  1-12;  Butte,  Versuch  der  Begriindung  eines 
System  der  Polezei  (1S07),  6  ff. ;  Rosshirt,  Ueber  den  Begriff  der  Staatspolizoi 
(1817),  34  ff.  One  of  the  principal  difficulties  is,  that  the  practical  domain  of 
the  police  power  is,  in  consequence  of  the  successive  grades  of  civilization 
through  which  a  people  passes,  subject  to  greater  modifications  than  any 
other  state  power.  We  call  attention  especially  to  the  expressions  "  without 
mediation,  to  prevent," and  "external  order,"  in  our  definition.  The  church, 
the  school,  the  administration  of  justice  etc.,  act  mediately  towards  the  pre- 
vention of  such  disturbances;  and  there  are  many  other  institutions  which 
offer  immediate  protection  to  order  of  a  higher  and  more  intellectual  nature. 


Sec.  XVIII.]     SCIENCES  RELATING  TO  NATIONAL  LIFE.     93 

SECTION  XVIII. 

SCIENCES  RELATING  TO  NATIONAL  LIFE.— STATISTICS. 

Statistics  we  call  the  picture  or  representation  of  social  life 
at  given  periods  of  time,  and  especially  at  the  present  time, 
drawn  on  a  scale  iu  accordance  witli  the  laws  of  development 
discovered  by  means  of  the  theoretical  sciences  above  named ; 
as  it  were,  a  section  through  the  stream.  {Sc/ilozcr  calls 
them:  history  standing  still.)^  Statistics,  as  thus  defined,  are 
as  far  removed  from  sa3dng  too  much  as  from  saying  too  little. 
To  give  a  complete  tableau  of  their  object,  statistics  should, 
of  course,  take  in  the  life  of  a  people,  in  all  its  aspects.  But 
they  should  look  upon  such  facts  only  as  their  own  property, 
the  meaning  of  which  they  are  able  to  understand;  that  is, 
such  only  as  can  be  ranged  under  known  laws  of  develop- 
ment. Unintelligible  facts  are  collected  only  in  the  hope  of 
penetrating  into  their  meaning  in  the  future,  by  comparing 
them  with  one  another.  In  the  meantime,  they  are  to  the  sta- 
tistician only  what  unfinished  experiments  are  to  the  investi- 
gator of  nature. 

The  view  is  daily  gaining  ground,  that  statistics  should  be 
occupied  —  without,  however,  confining  themselves  to  them  — 
with  present  facts,  with  "  facts  afiecting  society  and  the  state, 
which  are  susceptible  of  being  expressed  in  figures."  ^  The 
more  deceptive  the  immediate  observation  of  an  individual, 
isolated  fact  is,  in  cases  where  a  great  number  of  simultaneous 

'  See  the  great  number  of  earlier  definitions  collected  in  R.  von  Moltl,  Gesch. 
und  Literatur  der  Staatswissenschaften  III,  pp.  637  fi".  There  are  two  prin- 
cipal groups  of  them,  the  one  of  which  considers  it  as  the  science  of  things 
of  political  note,  the  other  as  the  science  of  actual  or  past  conditions. 

^  See  Du/(uf,  Traitd  de  Statistique,  1840;  Morcau  de  yi3/;//^5,  Elements  de 
Statistique,  1S47;  Knics^  Die  Statistik  als  sclbststandige  Wissenschaft,  1S50. 
B.  Hildcbnmd,  in  his  Jahrbiichern,  1S66,  I  etc.,  but  especially  .^«c/r/f2?'5  works. 
For  the  contrary  view,  see  Fallati,  Einlcitung  in  die  Wissenschaft  der  Statis- 
tik der  St.,  1S43;  yoitak,  Theorie  der  Statistik,  1S56,  and  Hecreii,  in  the  Gott^ 
Gelehrten  Anzeigen,  1S06,  No.  S4,  1807,  1302. 


94:  ■  INTRODUCTION.  [Ch.  II. 

or  scattered  individual  isolated  facts  of  national  life  should  be 
observed,  the  more  important  it  is  to  discover  proper  numeri- 
cal relations,  by  noting  all  the  like  acts  or  experiences  of  men, 
the  time  and  place  in  question,  and  the  relation  of  the  aggre- 
gate of  these  phenomena,  to  the  sum-total  of  the  population, 
or  to  the  sum-total  of  corresponding  phenomena  in  other 
places.  When  this  is  done,  and  the  focts  are  completely  enu- 
merated and  correctly  recorded,  there  is  no  danger  of  sub- 
jective error.  And  this  species  of  "  political  and  social  meas- 
uring," as  Hildebrand  calls  it,  may  be  applied,  not  only  to 
quantities,  bnt  to  all  qualities  accessible  to  the  observation  of 
the  senses;  since  the  individual  or  isolated  qualities  of  the 
things  enumerated,  may  be  again  made  objects  of  enumera- 
tion. Without  doubt,  this  mode  of  numerical  procedure  is  the 
most  perfect  for  all  those  divisions  of  statistics  in  which  it  can 
be  followed;  and  hence,  it  should  be  our  endeavor  to  make 
the  numerical  side  of  statistics  as  comprehensive  as  possible. 
But,  one  side  of  a  science  is  not  a  science  itself  As  there-is 
no  natural  science  proper  called  microscopy,  embracing  all 
the  observations  made  by  means  of  the  microscope,  so  care 
should  be  taken  n-ot  to  deduce  the  principle  of  a  science  from 
the  chief  instrument  it  employs.  There  wiU  always  be  many 
and  important  facts  in  national  life  which  can  not  be  subjected 
to  numerical  calculation,  although  they  may  be  established 
with  the  usual  amount  of  historical  certainty.  Were  statistics 
to  be  limited,  in  the  manner  mentioned  above,  they  would  re- 
main a  collection  of  fragments,  and  instead  of  being  a  science, 
properly  so-called,  become  a  method.^ 
Besides,  it  is  evident,  that,  of  statistics  in  general,  economic 

3  So  thinks  v.  Rilmclin  (Tiibinger  Zeitschr.,  1S63,  653  ft") ;  and  he  recommends 
in  place  of  statistics  an  independent  brancli  of  learning  bordering  on  historj 
and  geography,  to  be  called  demography.  His  statistics  is  a  science  auxil- 
iary to  all  the  experimental  sciences  ofman,  justas  criticism  and  hermeneutics 
are  a  methodological  science  auxiliary  to  many  sciences,  otherwise  different. 
It  would  be  difficult  to  justify  the  use  of  the  name  statistics  for  such  a  science, 
as  such  a  science  corresponds  to  neither  of  the  two  meanings  of  the  word 
status  (state  —  condition). 


Sec.  XIX.]  CAISIERALISTIC  SCIENCE.  95 

Statistics  constitute  a  chief  part,  and  precisely  the  part  most 
accessible  to  numerical  treatment.  As  these  cx:onomic  statis- 
tics need  to  be  always  directed  by  the  light  of  Political  Econ- 
omy, they  also  furnish  it  with  rich  materials  for  the  continuation 
of  its  structure,  and  for  the  strengthening  of  such  foundations 
as  it  already  has.  The}',  are,  moreover,  the  indispensable  con- 
dition of  the  application  of  economic  theorems  to  practice. 

SECTION  XIX. 

PRIVATE  ECONOMY  — CAMERALISTIC  SCIENCE. 

The  meaning  of  the  term  cameralistic  science  {Canicralvjiss- 
aisc/uift)  can  be  explained  only  by  the  history  of  the  cam- 
eralistic system.^  From  the  end  of  the  middle  ages,  we  find, 
in  most  German  countries,  an  institution  called  the  Council 
{KajHincr)  whose  province  it  was  to  administer  tlie  public 
domain,  and  to  watch  over  regal  rights.  At  first,  a  mere 
governmental  commission,  it  was  not  long  betbre  it  developed 
into  an  independent  board.  This  change  had  taken  place  in 
Burgundy  as  early  as  the  year  1409.  It  was  in  that  country 
that  the  emperor  Maximilian  became  acquainted  with  the  in- 
stitution ;  and  by  the  erection  of  the  aulic  councils  at  Innspruck 
and  Vienna  (1498  and  1501),  he  gave  the  principal  impulse  to 
the  imitation  of  it  in  Germany.  As,  at  that  time,  the  division 
of  labor  was  very  little  developed,  and  personal  and  collegial 
authority  all  the  more  developed  in  consequence,  it  is  easy  to 

1  The  ancients  understood  by  the  term  xapApo.  camera,  covered  places 
such  especially  as  -were  .vaulted,  also  vaults  of  the  most  varied  kind.  Com- 
pare Herod.  I,  199;  Diod.,  II,  9;  Strabo,  XI,  495;  Arrtan.  Exp.  Alex.,  VII,  5, 
55;  Dio  Cass.  XXXVI,  32;  Sallusf,  B.  C,  55;  Cicero,  ad  Q.  fratrem  III,  i; 
riin.,  II.  N.  XXX,  27;  Seneca,  Epist.,  S6;  Tacii.  Hist.  Ill,  47;  Sueio»,  Nero, 
34.  During  the  middle  ages,  the  meaning  treasure-chamber  (Schatzhammcr) 
became  predominant:  camera  est  locus,  in  qnem  thesaurus  rccoiUigitur,  vel cofi- 
clave,  in  quo  fecunia  reservatur  {Ocham,  Cap.  Quid  sit  Scaccarium).  It  gradu- 
ally became  synonymous  with  finance,  —  from  the  time  of  Charlemagne,  or  at 
least  since  Louis  II.  (Charter  of  S74).  See  Ducange,  Glossarium,  v.  Camera, 
and  Muratori  Antiquitt.  Ital.,  I,  932  ff.  • 


96  INTRODUCTION.  [Cir.  II. 

conceive  that  a  great  part  of  all  the  new  and  rapidly  increas- 
ing business  of  police  administration  was  confided  to  these 
councils.  They  were  charged  especially  with  what  is  known 
to-day  as  economic  police  (  Wirthschaftspolizei)  and  an  import- 
ant part  of  the  administration  of  justice,  in  its  lower  depart- 
ments, was  turned  over  to  their  subordinates.  The  most 
eminent  men  who  wrote,  in  the  seventeenth  century,  on  cam- 
eralistic  matters,  laid  great  stress  on  the  point,  that  it  was  the 
duty  of  the  aulic  councils  to  entertain  not  only  fiscal  questions, 
but  that  it  was  within  their  province  also,  to  determine  ques- 
tions  of  economic  police.^  The  interest  of  absolute  princes 
must  have  greatly  favored  these  cameralistic  institutions,  for 
they  were  in  their  hands  docile  tools,  which  escaped  the  an- 
noying intervention  of  the  states  of  their  realms. 

By  degrees,  the  knowledge  necessary  to  these  council 
officials,  and  which  found  no  place  in  the  lectures  on  law,  were 
formed  into  a  special  body  of  doctrine.  After  such  men  as 
Morhof  and  Thomasius  had  prepared  the  way,^  Frederick 
William  I.,  himself  a  clever  cameralist,  and  author  of  the  mas- 
terly financial  system  of  Prussia,  took  the  important  step  of 
founding,  at  Halle  and  Frankfurt  on  the  Oder,  special  chairs 
of  economy  and  cameralistic  science ;  which,  considering  the 
time,  were  very  ably  filled  by  Gasser  and  Dithmar.     (1727.) 

' "  A  husbandman  must  plow  and  manure  his  land  if  he  would  reap  a  har- 
vest from  it.  He  must  fatten  his  cattle  if  he  would  glaughter  them;  and 
furnish  his  cows  with  good  fodder  if  he  would  ha^'e  them  give  good  milk. 
In  like  manner,  a  prince  should  begin  by  assuring  his  subjects  healthy  and 
abundant  food,  if  he  would  take  anything  from  them :"  von  Schroder^  Fiirstl. 
Schatz-und  Rentkammer  (1686),  preface,  §  11.  Von  Horneck  before  him, 
Oesterreich  iiber  alles  wann  es  nur  will,  p.  220,  ed.  of  1707,  had  expressed  the 
idea  that  the  watchful  solicitude  for  the  public  economy  of  the  country  was 
no  farergon^  no  afpendix^  to  the  council  (Kammer)^  but  its  real  basis,  and 
that  it  embraced  many  subjects  which  had  nothing  in  common  with  the 
cameralia  C"  Cameralien  "^. 

^  Morhof ^  Polyhistor  (168S),  III.  Thomasius,  1728,  Cautelse  circa  prxcog- 
nita  Jurisprudentite  (17 10),  ch.  17.  (Cautelae  circa  studium  occonomicum.) 
Also,  in  his  lectures  on  Sechendorff^s  "  Teutschen  Fiirstenstaat."  Compare 
Roschcr,  Gesch.  der  N.  CEk.  in  Deutschland,  328  IT. 


Sec.  XX.]  PRIVATE  ECONOMY.  97 

There  was  thus  formed  in  the  German    universities  a  dis 
tinct  school  of  cameralists,  which,  through  Jung,  Rossig  and 
Schmalz,  reached  to  the  nineteenth  century.     The  term  camer- 
alistic  science,  the  creature  of  chance,  was  used,  it  must  be 
said,  with  very  various  limits  to  its  meaning.* 

However,  Political  Economy  in  Germany  developed  out  of 
the  science  of  law  and  the  cameralistic  sciences,  while  in  Eng- 
land and  Italy  it  had  its  origin  chiefly  in  the  study  of  questions 
of  finance  and  foreign  commerce. 


SECTION  XX. 

PRIVATE  ECONOMY. 

(CONTINUED.) 

If  we  abstract  from  cameralistic  science  as  it  was  understood 
in  the  last  century,  what  it  has  in  common  with  all  economy,^ 
and  therefore  with  public  economy,  next  that  which  belongs  to 
the  aggregate  of  governmental  economy,  there  remains  only  a 
number  of  rules,  such  as  those  which  govern  the  principal 
branches  of  private  business,  and  which  indicate  how  they  are 
to  be  carried  on  with  the  greatest  advantage  to  those  who  en- 
gage in  them.  Such  are  forest  and  rural  economy,  mining 
science,  technology,  including  architecture,  and  all  that  con- 
cerns founderies,  and  commercial  science.  Now  that  the  ex- 
pression cameralistic  science  is  altogether  obsolete,  the  aggre- 

*  While  Dithmar  (1731)  distinguishes  economy -police  and  canneralistic 
sciences  and  restricts  the  latter  to  finance  and  taxation;  Darjes  (1756)  com- 
prises under  the  name  of  cameralistic  science,  economy  (municipal  and  rural), 
and  police,  as  well  as  cameralistic  subjects  in  the  strict  sense  of  the  term, 
that  is,  the  public  domain  and  regal  rights.  While  Nau  (1791),  in  his 
"  Ersten  Linien  der  C,"  treats  only  of  the  branches  of  private  economy, 
Schmalz^  [I'jg'j)  treats  also  of  national  or  public  economy,  and  liosst'g-  (1792) 
divides  cameralistic  science  into  the  doctrine  of  the  public  demesne  and  regal 
rights  (cameralistic  science  in  the  narrower  sense),  and  the  doctrine  of  taxa- 
tion and  police. 

'  Thus,  for  instance,  all  that  concerns  domestic  economy,  book-keeping  and 
private  financial  administration. 
Vol.  1.— 7 


98  INTRODUCTION.  [Ch.  II. 

gate  of  these  might  be  designated  by  the  name  private  economy. 
Obviously,  we  should  have  here,  neither  a  simple  nor  pure  sci- 
ence, but  only  a  compilation  of  natural-philosophical  and  eco- 
nomic lemmas.  Thus,  in  agriculture,  for  instance,  a  knowl- 
edge of  the  different  kinds  of  soil,  of  the  tillage  of  land,  of  the 
different  plants  and  animals  etc.,  belongs  to  the  domain  of  nat- 
ural science;  while  all  that  relates  to  the  cost  of  production,  the 
employment  of  capital,  the  wages  of  labor,  the  exchange  of 
products,  net  product  and  the  price  of  land,  are  purely  politi- 
co-economical. The  political  economists  also  require  a  knowl- 
edge of  the  natural  side  of  the  cameralistic  sciences.  Such  a 
knowledge  is  indispenable  to  every  detailed  and  living  theory, 
and  especially  to  the  application  of  economic  science  to  prac- 
tice. The  great  difference  lies  in  this,  that  the  cameralist  inter- 
ests himself  in  the  production  of  material  goods  for  their  own 
sake,  while  the  political  economist  regards  them  only  in  their 
relations  to  national  life.^ 

It  would  seem,  moreover,  that  political  economists,  especial- 

'  John  Stuart  Mill,  Principles  of  Political  Economy  (1848),  I,  p.  25,  draws 
a  distinction  between  the  physical  conditions  which  influence  the  economic 
situation  of  a  people,  and  the  moral  and  psychological  conditions;  which  last 
have  their  origin  in  social  institutions  or  in  the  fundamental  principles  of  hu- 
man nature.  Only  the  latter  belong  to  the  domain  of  Political  Economy. 
According  to  J.  B.  Say,  Traite,  Introd.,  this  science  embraces  at  once  agri- 
culture, mauufactures  and  commerce,  but  only  in  their  relation  to  the  increase 
or  diminution  of  w-ealth,  and  does  not  concern  itself  with  the  means  employed 
to  reach  the  desired  end.  As  a  rule,  says  Arndt  (Naturgemasse  Volkswirth- 
schaft,  1851,  p.  16),  it  takes  into  consideration  not  so  much  things  themselves 
as  their  exchange  value.  Lotz  (Handbuch,  I,  p.  6  seq.),  in  like  manner, 
defines  Political  Economy  —  the  science  of  the  one  activity  which  constitutes 
the  basis  of  all  industries  etc.  F.  G.  Schulze  (Ueber  volkswirthschaftliche 
Begrundung  der  Gewerbswissenschaften,  1S26),  characterizes  Political  Econ- 
omy as  the  science  of  the  fundamental  conditions  of  the  well-being  of  a  peo- 
ple, in  so  far  as  they  lie  in  human  nature. 

When  Adam  Smith  (book  IV,  c.  II)  says  that  the  government  in  respect  to 
matters  of  economy  is  inferior  to  the  first  best  person  engaged  in  industrial 
pursuits,  he  is  right  only  from  a  technic  point  of  view.  And  when  Stezvart, 
on  the  other  hand,  vindicates  for  the  state  the  office  of  a  pater-familias  (book 
II,  ch.  13),  he  evidently  means  only  in  national  economical  matters. 


t>EC.  XXL]       WHAT  rOLITICAL  ECONOMY  TREATS  OF.       99 

h'  in  Germany,  have  attached  too  much  importance  to  putting 
formal  bounds  to  their  special  science.  Why  not  rather  fol- 
low the  example  of  the  students  of  nature  who  care  little 
whether  this  or  that  discovery  belongs  to  physics  or  chemis- 
try, to  astronomy  or  mathematics,  provided,  only,  very  many 
and  important  discoveries  are  mader^ 


SECTION  XXI. 

WHAT  POLITICAL  ECONOMY  TREATS  OF. 

Political  Economy  treats  chiefly  of  the  material  interests  of 
nations.  It  inquires  how  the  various  wants  of  the  people  of  a 
country,  especially  those  of  food,  clothing,  fuel,  shelter,  of  the 
sexual  instinct  etc.,  may  be  satisfied ;  how  the  satisfaction  of 
these  wants  influences  the  aggregate  national  life,  and  how 
in  turn,  they  are  influenced  by  the  national  life.  (Gospel  of 
Matth.,  4,  4.)  This  alone  suffices  to  enable  us  to  estimate  the 
importance  of  the  science.  The  relation  of  virtue  to  wealth 
is  likened  by  Bacon  to  that  of  an  army  to  its  baggage.  In 
Xenophon's  opinion,  wealth  is  really  useful  only  to  him  who 
knows  how  to  make  a  good  use  of  it.  From  an  economic  point 
of  view,  the  happiest  man  is  he  who  has  accumulated  most, 
honorably,  and  used  it  best.^  That,  even  in  a  material  sense, 
the  intellect  of  a  people  is  their  most  important  element,  is  evi- 
dent from  the  example  of  the  Chinese,  who  were  so  long  ac- 
quainted with  printing,  powder,  and  the  mariner's  compass, 
without,  by  their  means,  attaining  to  intelligent  public  opinion, 
forming  a  good  army,  or  coming  to  an  understanding  of  the 
art  of  navigation,  to  any  great  extent. 

The  undervaluing  of  economic  matters,  for  which  ages  of 
inferior  cultivation,  our  own  middle  ages  for  instance,  are  now 

3  See  also  Ran  (Ueber  die  Cameralwissenschaft,  Entwickelung  ihres  Wesens 
und  ihrer  Thcile,  1S25);  ^«K;«5/rt/'>t  (Cameralistische  Enclycopadie,  1S35). 

^Xcnopk.  fficonom.  I,  S  fT.  Cyrop.  VIII;  2,  23.  He  saw  with  equal  clear- 
ness  the  moral  light  and  shade  of  wealth.  CEcon.  XI.  9.  Conviv.  4.  Memor. 
1,6.    Cyrop.  VIII,  3,  35  ff.   IIiero4.) 


100  INTRODUCTION.  [Ch.  IL 

praised  and  now  blamed,  was  really  a  rare  exception  even 
during  these  ages.^  Other  kinds  of  acquisition  and  enjoyment 
then  occupied  the  foreground;  but  there  never  was  a  time, 
when  gain  and  enjoyment  in  general  were  not  favorite  objects 
of  pursuit,  and  held  in  high  esteem.  The  physical  wants  of 
uncultured  men  cry  out  much  louder  than  intellectual  ones. 
(§  2,  14.)^  On  the  other  hand,  in  over-cultivated  ages,  when 
decay  begins,  an  over-estimation  of  material  things  is  wont  to 
become  general.*  The  mere  servants  of  mammon,  whether 
as  political  economists  or  as  private  individuals,  may  see  their 
depravity  faithfully  reflected  in  communism  as  in  a  mirror. 
We  should  not  overlook  the  fact  that  it  is  with  whole  nations 

*  Thomas  Aquinas  values  earthly  goods  according  to  the  end  they  are 
inade  to  serve ;  when  used  for  a  good  purpose,  they  have  a  mediately  true  val- 
ue. Hence  it  was  an  error  of  the  stoics  to  despise  them  under  all  circum- 
stances.    (Summa  Theol.  II,  2.  Qu.,  50,  3.  58,  2.  59,  3.  125,  4.) 

*  Whateley  considers  the  savage  much  beneath  th  e  materialist,  instead  of 
superior  to  him.  The  latter  possesses,  although  he  frequently  abuses  it,  the 
faculty  of  self-control  and  forethought,  which  is  entirely  wanting  in  the 
former.  (Lectures,  No.  6.)  Dunoyer,  De  la  Liberte  du  Travail,  liv.  IV,  ch. 
I,  8,  an  apology  for  the  moral  wholesomeness  of  civilization,  since  promotive 
of  military  prowess,  favorable  to  the  development  of  the  sciences,  and  even 
poetical.  BatidriUart,  Manual  d'CEkonomie  politique,  1857,  24.  See  Fallati, 
Ueber  die  sogennannte  materiellen  Tendenz  der  Gegenwart,  1842. 

*  See  the  inscription  on  the  tomb  of  Sardanapalus :  vaUT  ^'j/^f^t  oaa 
i(pajov  xac  i(pu^pcaa  xai  fxsr  iqcovo;;  rsqm  ena&ov.  {Strabo,  XIV, 
672.)  Isaiah,  122,  13,  56,  12,  and  the  book  of  wisdom  (2)  characterizes  the 
view  of  the  fallen  Jewish  people.  In  Greece,  the  Cynic  and  Epicurean 
schools  were  only  different  phases  of  the  same  degeneration.  "  Thirst,  for 
money,  and  nothing  else,  will  be  the  ruin  of  Sparta!"  (Cicero,  De  Offic,  II, 
22,  77.)  See  the  magnificent  description  by  Demosthenes,  in  which  he  shows 
the  over-estimation  of  material  things  to  be  the  principal  cause  of  the  decline 
of  Athens,  and  in  which  he  lays  great  stress  on  the  fact,  that  Athens,  on  its 
decay,  had  a  larger  population,  more  wealth,  ships,  and  evidences  of  external 
power,  than  in  its  golden  age.  (Phil.,  Ill,  120  seq.)  Also  Phil.,  IV,  144, 
cautions  us  against  the  Manchester  criterion  of  national  prosperity.  See 
Plato,  De  Rep.,  VIII.  In  Rome,  the  principle  ommia  venalia  esse  was  a  chief 
element  in  the  total  decline  and  fall  of  the  republic.  (Sallust,  Cat.,  10  ff..  Jug., 
8  ff.)  In  an  age  when  people  think  they  can  do  everything  with  money,  the 
ruin  of  all  things  is  the  last  end  of  mercantile,  financial  and  political  specu- 
lation.     (Co7idillac,  Le  Commerce  et  le  Gouverment,  1776,  II,  18.) 


Sec.  XXL]      WHAT  POLITICAL  ECONOMY  TREATS  OF.      IQl 

as  with  the  individual  man  who  amasses  his  own  fortune.  He 
reaches  the  cuhiiinating  point  of  his  weahh  generally  after  he 
has  passed  the  prime  of  life.  The  most  flourishing  period  of 
a  nation's  existence  is  wont  just  to  precede  its  decay,  and  to 
introduce  it.^  Hence,  here  nothing  could  be  more  untrue,  as 
Macchiavelh  has  remarked,  than  the  general  opinion  that 
money  is  the  sinew  of  war.* 

*  Under  Pericles,  the  Athenian  treasury  of  the  state  contained  at  most  9,700 
talents.  (Thucyd.  II,  13.)  On  the  other  hand,  Alexander  the  Great  had  a 
treasure  of  iSo,ooo  talents  accumulated  in  the  citadel  of  Ecbatana.  {Sirabo, 
XV,  731);  Ptolomy  II.  left  after  him  740,000  talents.  [Apfian.  pra;f.  10, 
Droyscii,  Geschichte  dcs  Ilcllenismus  II,  44  ff.)  In  Nero's  time  there  was 
man}'  a  freedman's  daughter  who  owned  a  looking  glass  worth  a  greater  sum 
than  the  senate  had  appropriated  as  a  doAvry  to  the  daughter  of  the  great 
Scipio.  {Seneca,  Qua?st.  Natur.  I,  17.  Compare  Cons,  ad  Helviam,  12.J 
McCnllock  says  that  an  intelligent  despotism  can  enrich  a  nation  as  well  as 
freedom.     (In  his  Discourse  on  the  Rise,  etc.  of  Polit.  Econ.,  1825,  77  seq.) 

^  Bacon  (Sermones,  56)  says  that  youthful  states  distingui  sh  themselves 
specially  by  their  warlike  instincts;  mature  states  in  literature;  old  and  de- 
caying ones  in  industry  and  commerce.  JDavenant  very  happily  remarks, 
that  the  development  of  commerce  among  a  people  has  an  ambiguous  value. 
It,  indeed,  increases  wealtli,  but,  at  the  same  time,  it  may  introduce  luxury, 
covetousness  and  fraud,  destroy  virtue,  do  away  with  simplicity  of  manners 
and.customs,  and  then  it  inevitably  ends  in  internal  or  external  slavery. 
(Works  II,  275.)  The  simplicity  of  the  patriarchal  state,  however,  cannot 
last  always,  if  for  no  other  reason,  because  of  the  emulation  of  foreign  na- 
tions, (i,  348,  ff.)  The  impoverishment  of  even  the  wealthiest  nation  is 
certainly  inevitable  when  its  morality  dfclines.  It  is  especially  h-ue,  that  the 
public  economy  of  a  people  can  be  prosperous  only  where  political  liberty 
obtains,  and  this,  independent  of  the  fact  that  wealth  without  freedom  has  no 
value.  (II,  336  ff.,  3S0,  fi'.,  2S5.)  According  to  Ferguson,  private  wealth,  hon- 
estly acquired,  used  rightly  and  with  moderation,  :nanaged  with  a  sense  of 
independence,  may  be  to  those  who  possess  it,  an  element  of  self-confidence 
and  of  liberty,  provided  they  loosen  their  purse  strings  not  through  vanity 
or  for  their  personal  gratification,  but  for  commendable  party  purposes.  But 
in  periods  of  decay,  even  a  greater  amount  of  wealth  is  very  far  from  pro- 
ducing these  results.  (History  of  Civil  Society,  VI,  5.)  W/iatcly,  on  the 
contrary,  maintains  that  only  personal  wealth  —  never  national  wealth  —  has 
a  disastrous  influence  on  morals.    Lectures,  No.  2. 


102  INTRODUCTION.  [Ch.  III. 

CHAPTER  HI. 

THE  METHODS  OF  POLITICAL  ECONOMY. 


SECTION  XXII. 

FORMER    METHODS. 

The  methods'  which  would  apply  to  any  science  of  national 
life,  principles  borrowed  from  any  other  science,  are  now  gen- 
erally looked  upon  as  obsolete.  This  is  true,  especially,  of 
the  theological  method  which  prevailed,  almost  exclusively, 
during  the  middle  ages,'^  and  of  the  juridical  method  of  the 
seventeenth  century. 

It  would  be  much  more  in  harmony  with  the  intellectual 
tendencies  of  the  time,  to  adopt  a  mathematical  mode  of  treat- 
ment in  Political  Economy,  involving,  as  such  a  mode  of  treat- 
ment does,  not  the  matter  of  the  science,  but  only  a  formal 

'  "  The  method  of  a  science  is  of  much  greater  importance  than  any  indi- 
vidual discovery,  however  wonderful."     (Cuvicr.) 

2  Thus,  for  instance,  G.  Bid  (ob.  1495),  the  "  last  of  the  schoolmen,"  gives 
us  his  doctrine  of  Political  Economy,  in  a  work  on  Dogmatic  Theology,  in 
the  chapter  on  Penfince,  his  starting  point  being  the  inquiry,  how  the  eco- 
nomic damage  caused  by  the  sinner  may  be  repaired.  Jioscher,  Gesch- 
ichte  der  Nationalokonomik  in  Deutchland,  1074,  I,  23.  The  Melittothe- 
ologia,  Arachnotheologia  of  later  times!  A  recent  attempt  in  this  direc- 
tion has  been  made  by  Ad.  Miiller,  Nothwendigkeit  einer  theologischen 
Grundage  der  gesammten  Staatswissenschaften  und  der  Staatswirthschaft 
insbesondere  (1819),  i.  e.,  "  necessity  of  a  theological  basis  for  all  political  sci- 
ence, and  especially  lor  Political  Economy."  He  divides  political  science 
into  two  parts :  the  science  of  law,  and  the  science  of  wisdom,  embracing 
under  the  latter  denomination,  politics.  Political  Economy,  etc.  Law  ema- 
nates from  God,  as  supreme  judge;  the  science  of  Avisdom  from  God,  as  our 
Supreme  Father. 


Sec.  XXII.]  FORMER  METHODS.  103 

principle.  That  which  is  general  in  Political  Economy  has, 
it  must  be  acknowledged,  much  that  is  analogous  to  the  math- 
ematical sciences.  Like  the  latter,  it  swarms  with  abstrac- 
tions.^ Just  as  there  are,  strictly  speaking,  no  mathematical 
lines  or  points  in  nature,  and  no  mathematical  lever,  there  is 
nowhere  such  a  thing  as  production  or  rent,  entirely  pure  and 
simple.  The  mathematical  laws  of  motion  operate  in  a  hypo- 
thetical vacuum,  and,  where  applied,  are  subjected  to  important 
moditications,  in  consequence  of  atmospheric  resistance.  Some- 
thing similar  is  true  of  most  of  the  laws  of  our  science ;  as,  for 
instance,  those  in  accordance  wath  which  the  price  of  com- 
modities is  lixed  by  the  buyer  and  seller.  It  also,  always  sup- 
poses the  parties  to  the  contract  to  be  guided  only  by  a  sense 
of  their  own  best  interest,  and  not  to  be  influenced  by  second- 
ary considerations.  It  is  not,  therefore,  to  be  wondered  at,  that 
many  authors  have  endeavored  to  clothe  the  laws  of  Political 
Economy  in  algebraic  formulai.^     And,  indeed,  wherever  mag- 

3  Abstraction  is  indulged  in  on  a  large  scale,  when  a  number  of  elements 
which  are  always  found  combined  in  life,  are  here  separated  and  examined 
apart.  It  is  precisely  thus  that  anatomy  proceeds,  dissecting  each  member  of 
the  human  frame,  separating  the  bones,  ligaments  and  muscles  from  one  an- 
other, thus  becoming  the  necessary  preparatory  school  to  physiology. 

^Thus,  for  instance.  Canard^  Principes  d'Economie  politique  (iSoi).  Also 
Kronche^  in  several  of  his  works,  and  Count  Buqitoy,  in  his  Theorie  der  Na- 
tionalwirthschaft  (1816),  p.  333  iT. ;  Lang,  Grundlinien  einer  politischen 
Arithmetik,  Charkow,  181 1,  and  more  especially  v.  TJiUnen,  Der  isolirte 
Staat,  vol.  I  (1842),  vol.  II,  1S50.  See  my  criticism  of  his  method  in  Birn- 
5rt«/rt'5  Georgika,  1869,  77  ft".  Von  ThUnciCs  fii'st  volume  is  an  essay  towards  a 
geometrical  exposition  of  the  science.  See  also  Rau,  Lehrbuch  I,  §  154,  ap- 
pendix; von  Mangoldt,  Grundriss  der  Volkswirthschaftslehfe  (1862);  Cazaux, 
Elements  d'  Economie  privee  et  Principes  mathematiques  de  la  Theorie  des 
Richesses  (1S38);  F.  Fuoco,  Saggi  economici  (1827)  II,  61  ft".  Walrus,  Ele- 
ments d' Econ.  p61itique  pure  (1874).  jfcvons  has  recently  endeavored  to 
give  Political  Economy  a  mathematical  basis  by  reducing  the  objects  of  which 
it  treats  to  the  calculable  feelings  of  pleasure  (4-)  and  pain  (— ).  The  duration 
of  a  feeling  is  tjeated  as  an  abscissa,  its  intensity  as  the  ordinate  of  a  curve, 
and  its  quantity  as  the  area.  Future  feelings  are  reduced  to  present  ones,  by 
allowing  for  their  distance,  and  the  uncertainty  of  their  occurrence.  All  this, 
however,  is  rather  curious  than  scientifically  useful. 


104  INTRODUCTION.  [Ch.  III. 

nitudes  and  the  relations  of  magnitudes  to  one  another  are 
treated  of,  it  must  be  possible  to  subject  them  to  calculation. 
Herbart  has  shown  that  this  is  so  in  the  case  of  psychology;^ 
and  all  the  sciences  which  treat  of  national  life,  especially  our 
own,  are  psychological.^  But  the  advantages  of  the  mathemat- 
ical mode  of  expression  diminish  as  the  facts  to  which  it  is  ap- 
plied become  more  complicated.  This  is  true  even  in  the  or- 
dinary psychology  of  the  individual.  How  much  more,  there- 
fore, in  the  portraying  of  national  life!  Here  the  algebraic 
formulce  would  soon  become  so  con  plicated,  as  to  make  all 
further  progress  in  the  operation  next  to  impossible.'''  Their 
employment,  especially  in  a  science  whose  sphere  it  is,  at  pres- 
ent, to  increase  the  number  of  the  facts  observed,  to  make 
them  the  object  of  exhaustive  investigation,  and  vary  the  com- 
binations into  which  they  may  be  made  to  enter,  is  a  matter  of 
great  difficulty,  if  not  entirely  impossible.^  For,  most  assured- 
ly, as  our  science  has  to  do  with  men,  it  must  take  them  and 
treat  them  as  they  actually  are,  moved  at  once  by  very  differ- 
ent and  non-economic  motives,  belonging  to  an  entirely  definite 
people,  state,  age  etc.     The  abstraction  according  to  which 

*  Herbart^  Ueber  die  Moglichkeit  und  Nothwendigkeit,  Mathematik  auf 
Psychologic  anzuwenden ;  Kleinere  Schriften,  II,  417. 

*  How  detrimental  it  is  to  ignore  the  psychological  nature  of  Political  Econ- 
omy is  evident  from  the  errors  of  Karl  Marx,  who  personifies  things  in  a 
manner  almost  mythological.  Thus,  according  to  him,  modesty  should  be 
ascribed  to  a  coat  which  exchanges  for  a  piece  of  linen,  and  purpose  to  the 
linen,  etc.  (Das  Kapital,  1S67,  I,  19,  22,  seq.)  The  greatest  fault  of  this  in- 
telligent but  not  very  acute  man,  his  inability  to  reduce  complicated  phenom- 
ena to  their  constituent  elements,  is  greatly  increased  by  his  way  of  thus 
looking  at  things. 

^  Compare  5^.  B.  Say,  Traite  I,  introd.  Thus,  it  would  be  certainly  possi- 
ble to  describe  every  individual's  physiognomy  by  means  of  a  very  compli- 
cated mathematical  formula,  and  yet  there  is  no  one  who  would  not  prefer 
the  usual  mode  of  taking  pictures.  The  simple  motions  of  the  heavenly 
bodies,  on  the  contrary,  are  always  treated  mathematically.  [Loize,  Arige- 
meine  Physiologic,  322  fl.) 

8  When  Favjcett  says  that  all  "  principles  of  Political  Economy  are  describ- 
ing tendencies  instead  of  actual  results"  (Manual  of  Political  Economy,  1863, 
p.  90),  our  method,  the  historical,  would  give  also  the  theory  of  the  latter. 


Sec.  XXIL]  FORMER  METHODS.  105 

all  men  are  by  nature  the  same,  different  only  in  consequence 
of  a  difterence  of  education,  position  in  life  etc.,  all  equally 
well  equipped,  skillful  and  free  in  the  matter  of  economic  pro- 
duction and  consumption,  i-s  one  which,  as  Ricardo  and  von 
Thiinen  have  shown,  must  pass  as  an  indispensable  stage  in 
the  preparatory  labors  of  political  economists.  It  would  be 
especially  well,  when  an  economic  fact  is  produced  by  the  co- 
operation of  many  different  factors,  for  the  investigator  to  men- 
tally isolate  the  factor  of  which,  for  the  time  being,  he  wishes 
to  examine  the  peculiar  nature.  All  other  factors  should,  for 
a  time,  be  considered  as  not  operating,  and  as  unchangeable, 
and  then  the  question  asked.  What  would  be  the  effect  of  a 
change  in  the  factor  to  be  examined,  whether  the  change  be 
occasioned  b}'  enlarging  or  diminishing  it.'^  But  it  never  should 
be  lost  sight  of,  that  such  a  one  is  only  an  abstraction  after  all, 
for  which,  not  only  in  the  transition  to  practice,  but  even  in  fin- 
ished theor}',  we  must  turn  to  the  infinite  variety  of  real  life.^ 
There  are  two  important  inquiries  in  all  sciences  whose  sub- 
ject matter  is  national  or  social  life:  i.  What  isF  (What  has 
been?  How  did  it  become  so?  etc.)  2.  What  s/iould  dcP  The 
greater  number  of  political  economists  have  confounded  these 
questions  one  with  the  other,  but  not  all  to  the  same  extent.^" 

*This  was  lost  sight  of  by  most  writers  during  the  second  half  of  the 
eighteenth  century,  because  they  looked  upon  that  equality  as  the  really 
oldest  condition,  and  its  restoration  the  ideal  to  be  striven  for.  How  much 
of  this  still  clings  to  the  present  free-trade  school;  see  in  Roscher^  Gesch.  der 
N.  Oi^k.  in  Deutschland,  10  17  ff. 

">  Thus,  for  instance,  Ricardo  examines,  almost  exclusively,  the  actual  con- 
dition of  things,  while  the  socialists  confine  themselves,  still  more  exclu- 
sively, to  the  investigation  of  how  things  should  be.  It  has  been  very  usual 
in  Germany  since  Rau  wrote,  to  draw  a  distinction  between  theoretical  and 
practical  Political  Economy.  There  are  many  who  think  that  a  good  man- 
ual of  practical  Political  Economy,  dropping  the  introduction,  demonstrations 
etc.,  would  be  also  a  good  code  of  law,  of  universal  application.  Mercicr  de 
la  Riviere  has  said  that  he  wished  to  propose  an  organization  which  should 
be  necessarily  productive  of  all  the  happiness  which  can  be  enjoyed  on  earth. 
(Ordre  essentiel  et  naturel  (1767),  Disc,  prelim.)  Compare,  also,  Sismondi^ 
N.  Principes,  I,  ch.  2. 


106  INTRODUCTION.  [Ch  III.. 

When  a  careful  distinction  is  made  between  them,  the  contrast 
between  the  (realistic)  hysiological  or  historical,  and  the  ideal- 
istic methods  is  brought  out.^^ 

SECTION  XXIII. 

THE  IDEALISTIC  METHOD. 

Any  one  who  has  read  a  goodly  number  of  idealistic  works 
treating  of  public  economy  (the  state,  law  etc.)  cannot  have 
failed  to  be  struck  by  the  enormous  differences,  and  even  con- 
tradictions, as  to  what  theorizers  have  considered  desirable  and 

"  The  word  method  is  used  in  an  essentially  different  sense,  when  the  in- 
quiry is,  whether  the  inductive  or  deductive  method  is  followed  in  Political 
Economy,  y.  S.  ISIill  calls  Political  Economy,  and,  indeed,  all  "  sociology," 
a  concrete  deductive  science,  whose  a  priori  conclusions,  based  on  the  laws  of 
human  nature,  must  be  tested  by  experience,  either  by  comparing  them  with 
the  concrete  phenomena  themselves,  or  with  their  emperical  laws.  It,  in 
this,  resembles  astronomy  and  physics.  (System  of  Logic  VI,  ch.  9.  Es- 
says on  some  unsettled  questions  of  Political  E.,  No.  5.)  According  to  this, 
an  economic  fact  can  be  said  to  have  received  a  scientific  explanation  only 
when  its  deductive  and  inductive  explanations  have  met  and  agreed.  "  Only 
those  principles  which,  after  they  have  been  obtained  by  the  one,  are  con- 
firmed by  the  other  method,  can  be  said  to  have  a  scientific  basis."  (von 
Mangoldt^  Grundriss,  8.)  While  I  agree  to  this  view,  it  seems  necessary  to 
me  to  mention  points  wherein  caution  is  necessary :  A.  Even  the  deduc- 
tive explanation  of  economic  facts  is  based  on  observation,  namely,  on  the 
self-observation  of  the  person  accounting  lor  them,  who,  consciously  or  un- 
consciously, must  always  inquire:  If  I  had  experienced  or  accomplished  the 
same  fact,  what  should  I  have  thought,  willed  and  felt.'  The  man  who  can- 
not translate  himself  into  the  souls  of  others,  will  give  a  wrong  explanation 
of  most  economic  facts.  In  the  question,  for  instance,  of  the  determination 
of  the  price  of  an  article,  the  person  who  can  look  into  the  mind  of  one  of 
the  contracting  parties  only,  will  give  a  one-sided  explanation  of  the  facts. 
B.  Moreover,  every  explanation,  that  is,  satisfactory  connection  of  the  fact 
seeking  explanation  with  other  facts  which  are  already  clear,  can  be  only 
provisional.  The  wider  our  horizon  grows,  the  deeper  should  our  solution 
of  all  questions  become.  A  hundred  years  hence,  should  science  increase  in 
the  mean  time,  the  solutions  which  are  satisfactory  to  us  will  be  looked 
down  upon  by  our  posterity,  as  the  speculations  of  our  fathers  antecedent  to 
Adam  Smith's  time  are  looked  down  upon  by  us. 


Sec.  XXIV.]  THE  IDEALISTIC  METHOD.  107 

necessar}-.  There  is  scarcely  an  important  point  which  the 
highest  authorities  may  not  be  cited  for  or  against.  We  must 
not  close  our  eyes  to  this  fact.  "  The  giddiness  that  comes 
from  contemplating  the  depths  of  knowledge  is  the  beginning 
of  philosophy,  as  the  god  Thaumas  was,  according  to  the  fa- 
ble, the  father  of  Iris."  {Plato.)  In  a  precisely  similar  man- 
ner, the  student  of  public  economy  (politics,  the  philosophy  of 
law  etc.)  must  familiarize  himself  with  the  variations  that  have 
taken  place  in  what  men,  at  different  periods  of  history,  have 
required  of  the  state  and  public  economy,  until  he  is  lost  in 
wonder  at  the  contemplation. 

SECTION  XXIV. 

THE  IDEALISTIC  METHOD. 

(CONTINUED.) 

It  is  impossible  to  fail  to  notice  at  once  that  those  ideal  de- 
scriptions wdiich  have  enjoyed  great  fame  and  exerted  great 
influence,  depart  very  little  from  the  real  conditions  of  the  pub- 
lic economy  (of  the  state,  law  etc.)  surrounding  their  authors.^ 
This  is  not  mere  chance.  The  power  of  great  theorizers,  as, 
indeed,  of  all  great  men,  lies,  as  a  rule,  in  this,  that  they  satisfy 
the  want  of  their  own  time  to  an  unusual  extent ;  and  it  is  the 
peculiar  task  of  theorizers  to  give  expression  to  this  want 
with  scientific  clearness,  and  to  justify  it  with  scientific  depth. 
But  the  real  wants  of  a  people  will,  in  the  long  run,  be  satis- 
fied in  life,"  so  far  as  this  is  possible  to  the  moral  imperfec- 

'  Tanquam  e  vinctilis  sermocinantu}\  says  Bacon  (De  Dignit.  et  Augm.  Scient., 
Ill,  3),  of  those  who  have  written  in  a  not  non-practical  -way  on  the  laws. 
Hugo,  also  (Naturrccht,  1S19,  p.  9),  calls  attention  to  the  resemblance  of  the 
so-called  laws  of  nature,  to  the  positive  law  in  force  at  the  time.  As  to  polit- 
ical idealism,  see  Roscher:  De  historical  doctrintc  apud  sophistas  majores 
vestigiis  (Gdtt.  1S3S,  26  ff.).  The  only  exceptions  to  this  rule  are  the  eclec- 
tics, who  form  their  own  system  from  the  blossoms  of  all  foreign  ones,  a  sys- 
tem, indeed,  without  root,  and  which  therefore  must  soon  wither. 

'  In  this  place,  naturally,  such  an  assertion  can  be  made  only  as  a  pro- 
gramme to  be  carried  out,  the  proof  whereof  is  to  be  sought  in  the  rest  of  the 


108  INTRODUC-ilON  [Ch.  III. 

tion  of  man.  We  should  at  least  be  on  our  guard  when  we 
hear  it  said  that  w  hole  nations  have  been  forced  into  an  "  un- 
natural" course  by  priests,  tyrants  and  cavilers.  For,  to  leave 
human  freedom  and  divine  Providence  out  of  consideration 
entirely,  how  is  such  a  thing  possible?  The  supposed  tyrants 
are  generally  part  and  parcel  of  the  people  themselves ;  all 
their  resources  are  derived  from  the  people.  They  must  have 
been  new  Archimedeses  standing  outside  of  their  own  world. 
(Compare,  however,  infra^  %  263.) 

It  is  true,  that  if  the  result  of  the  growth  of  generations  be 
to  gradually  produce  a  different  people,  these  different  men 
may  require  different  institutions.  Then  a  struggle  arises  be- 
tween the  old  and  those  of  the  younger  generation ;  the  former 
wish  to  retain  what  has  been  tested  by  time,  the  latter  to  seek 
for  the  satisfaction  of  their  new  wants  by  new  means.  As  the 
sea  always  oscillates  between  the  flowing  and  ebbing  of  the 
tides,  so  the  life  of  nations,  between  periods  of  repose  and  of 
crisis:  periods  of  repose,  when  existing  forms  answer  to  the 
real  substance  of  things,  and  of  crisis,  when  the  changed  sub- 
stance or  contents  seeks  to  build  up  a  new  form  for  itself. 
Such  crises  are  called  reforms  when  they  are  effected  in  a 
peaceful  way,  and  in  accordance  with  positive  law.  When 
accomplished  in  violation  of  law,  they  are  called  revolutions.^ 

That  every  revolution,  it  matters  not  how  great  the  need  of 
the  change  produced  by  it,  is  as  such  an  enormous  evil,  a  seri- 

work.  By  "  the  people,"  we  do  not  mean  the  governed,  to  the  exclusion  of  the 
governing  classes,  but  both  classes  together.  We  attach  to  the  expression 
the  most  extensive  meaning  possible.  We  do  not  limit  it  to  the  present  gen- 
eration, but  intend  it  to  cover  all  the  generations  from  the  beginning  of  a 
people's  history  to  its  end. 

3  The  custom,  Avhich  has  become  general,  of  calling  all  democratic  move- 
ments, and  them  only,  revolutions  (thus  Staid:  Was  ist  Revolution.?  1852, 
and  many  other  writers  of  an  entirely  opposite  tendency,  especially  in  France), 
is  not  warranted.  It  is  true  that  democratic  (and  imperial)  revolutions  are 
more  frequent  than  others  in  our  times,  just  as  aristocratic  revolutions  were 
in  the  middle  ages,  and  monarchical  at  the  beginning  of  modern  history. 
The  essence  of  revolution,  however,  is  in  the  operation  of  change  contrary  to 
positive  law,  acknowledged  as  such  by  the  consciousness  of  the  people. 


Sec.  XXIV.]  THE  IDEALISTIC  METHOD.  IQO 

ous,  and  sometimes,  fatal  disease  of  the  body  politic,  is  self- 
evident.  The  injury  to  morals  which  the  spectacle  of  victorious 
wrong  almost  always  produces  can  be  healed,  as  a  rule,  only 
in  the  following  generation.  Where  law  has  been  once  tram- 
pled on,  the  "right  of  the  stronger"  will  prevail;  and  the 
stronger  is,  to  some  extent,  the  most  unscrupulous  and  reck- 
less in  the  choice  of  the  means  to  be  employed.  Hence,  the 
well-known  fact,  that  in  revolutionary  times  the  worst  so  fre- 
quently remain  the  victors.  The  counter-revolution  which  is 
wont  to  follow  on  the  heels  of  revolution,  and  with  a  corres- 
ponding violence,  is  a  compensation  only  to  the  most  short- 
sighted. It  allows  the  disease,  the  familiarizing  of  the  people 
with  the  infringement  of  law,  to  continue,  until  the  hitherto 
sound  parts  are  attacked.  Hence,  a  people  should,  if  they 
would  have  it  go  well  with  them,  in  the  changes  in  the  form 
of  things  which  they  make,  take  as  their  model  Time,  whose 
reforms  are  the  surest  and  most  irresistible,  but,  at  the  same 
time,  as  Bacon  says,  so  gradual  that  they  cannot  be  seen  or 
observed  at  any  one  moment.  It  is  true,  that,  as  all  that  is 
great  is  difficult,  so  also  is  the  carrying  out  of  uninterrupted 
reform.  Its  carrying  out,  indeed,  supposes  two  things:  a  con- 
stitution so  wisely  planned  as  to  keep  the  doors  open  both  to 
the  disappearing  institutions  of  the  past  and  to  the  coming 
institutions  of  the  future;  and,  among  all  classes  of  the  people, 
a  moral  control  of  themselves,  so  absolute  that,  no  matter  w^hat 
the  inconvenience,  or  how  great  the  sacrifice,  legal  ways  shall 
alone  be  used.  In  this  manner,  two  of  the  greatest  and  ap- 
parently most  contradictory  wants  of  every  legal  or  moral 
person,  the  w-ant  of  uninterrupted  continuity  and  that  of  free 
development,  may  be  satisfied. 


110  INTRODUCTION.  [Ch.  Ill 


SECTION  XXV. 

THE  IDEALISTIC  METHOD. 

(CONTINUED.) 

It  is  doubtless  true  that  all  economic  laws,  and  all  economic 
institutions  are  made  for  the  people,  not  the  people  for  such  laws 
and  institutions.  Their  mutability  is,  therefore,  by  no  means 
such  an  evil  as  mankind  should  endeavor  to  remove,  but  is 
wholesome  and  laudable,  so  far  as  it  runs  parallel  with  the 
transformation  of  the  people,  and  the  changes  which  their 
wants  have  undergone.^  Hence,  there  is  no  reason  why  the 
most  various  ideal  systems  should  contradict  one  another.  Any 
one  of  them  may  be  right,  but,  of  course,  only  for  one  people 
and  one  age.  In  this  case,  the  only  error  would  be,  if  they 
should  claim  to  be  universally  applicable.  There  can  no  more 
be  an  economic  ideal  adapted  to  the  various  wants  of  every 
people,  than  a  garment  which  should  fit  every  individual. 
The  leading-strings  of  children  and  the  staff  of  age  would 
be  great  annoyances  to  the  man.  "  Reason  becomes  non- 
sense cind  beneficence  a  torment."  Hence,  whoever  would 
elaborate  the  ideal  of  the  best  public  economy  —  and  the  greater 
number  of  political  economists  have  really  wished  to  do  this  — 
should,  if  he  would  be  perfectly  true,  and  at  the  same  time  prac- 
tical, place  in  juxta  position  as  many  different  ideals  as  there 
are  different  types  of  people.^  He  would,  moreover,  have 
to  revise  his  work  every  few  years;  for,  in  proportion  as 
a  people  change,  and  new  wants  originate,  the  economic 
ideal  suitable  to  them  must  change  also.  But  it  is  impossible 
to  accomplish  this  on  so  large  a  scale.  Besides,  to  appreciate 
the  present  thus  instantaneousl}^  and  to  perfectly  feel  the  pulse 

'  Compare,  especially,  the  first  pages  of  Sir  y.  Stcxvarf,  Principles  of  Polit 
Economy. 

*  See  Colton,  Public  Economy  of  the  United  States,  p.  28,  who,  indeed,  un- 
wai-rantedly,  refers  to  the  whole  of  Political  Economy,  what  properly  belongs 
to  its  precepts. 


Sec.  XXVI.]  THE  HISTORICAL  METHOD.  m 

of  time  thus  uninterruptedly,  requires  a  species  of  talent  difler- 
ent  from  what  even  the  most  distinj^uished  scientists  are 
wont  to  possess ;  talents  of  an  entirely  practical  nature,  such  as 
become  a  great  minister  of  the  interior  or  of  finance.  And  it  is 
an  acknowledged  lact,  that  ev  en  the  cleverest  of  such  prac- 
ticioners,  as  the  younger  Pitt  said  of  himself,  generally  feel 
their  way  instinctivel}',  and  do  not  see  it  with  the  clearness 
necessary  to  indicate  it  to  others. 

SECTION  XXVI. 

THE  HISTORICAL  METHOD.  — THE.  ANATOMY   AND   PHYSI- 
OLOGY OF   PUBLIC  ECONOMY. 

We  refuse  entirely  to  lend  ourselves  in  theory  to  the  con- 
struction of  such  ideal  systems.  Our  aim  is  simply  to  describe 
man's  economic  nature  and  economic  wants,  to  investigate  the 
laws  and  the  character  of  the  institutions  which  are  adapted  to 
the  satisfaction  of  these  wants,  and  the  greater  or  less  amount 
of  success  by  which  they  have  been  attended.^  Our  task,  is, 
therefore,  so  to  speak,  the  anatomy  and  physiology  of  social 
or  national  economy! 

These  are  matters  to  be  found  within  the  domain  of  reality, 
susceptible  of  demonstration  or  refutation  by  the  ordinary  op- 
erations of  science ;  entirely  true  or  entirely  false,  and,  there- 
fore, in  the  former  case,  not  liable  to  become  obsolete.  We 
proceed  after  the  manner  of  the  investigator  of  nature.  We, 
too,  have  our  dissecting  knife  and  microscope,  and  we  have 
an  advantage  over  the  student  of  nature  in  this,  that  the  self- 
observation  of  the  body  is  exceedingly  limited,  while  that  of 
mind  is  almost  unlimited.  There  are  other  respects,  however, 
in  which  he  has  the  advantage  over  us.     When  he  wishes  to 

'  Je  ii'imfose  ricn,  je  7ie  frof>ose  mime  ricn  :  f  expose.  {CIi.  Dunoyer').  CJier- 
bulicz,  Precis  de  la  Science  cconomiquc,  1S62,  p.  7  ff.,  has  exaggerated  this 
idea  in  a  strangely  non-practical  manner.  That  the  historical  method  docs  not 
differ  essentially  from  the  statistical  as  recently  recommended,  see  Reseller^ 
Gesch.  der  Nat.  CEk.,  1035  seq. 


112  INTRODUCTION.  [Ch.  III. 

Study  a  given  species,  he  may  make  a  hundred  or  a  thousand 
experiments,  and  use  a  hundred  or  a  thousand  individuals  for 
his  purpose.  Hence,  he  can  easily  control  each  separate  ob- 
servation, and  distinguish  the  exception  from  the  rule.  But, 
how  many  nations  are  there  which  we  can  make  use  of  for 
purposes  of  comparison  ?  Their  very  fewness  makes  it  all  the 
more  imperative  to  compare  them  all.  Doubtless,  comparison 
cannot  supply  the  place  of  observation;  but  observation  may 
be  thus  rendered  more  thorough,  many-sided,  and  richer  in 
the  number  of  its  points  of  view.  Interested  alike  in  the  dif- 
ferences and  resemblances,  we  must  first  form  our  rules  from 
the  latter,  consider  the  former  as  the  exceptions,  and  then  en- 
deavor to  explain  them.     {Infra^  §  266). 

SECTION  XXVII. 

ADVANTAGES  OF  THE  HISTORICAL  OR  PHYSIOLOGICAL 

METHOD, 

The  thorough  application  of  this  method  will  do  away  with 
a  great  number  of  controversies  on  important  questions.^  Men 
are  as  far  removed  from  being  devils  as  from  being  angels. 
We  meet  with  few  who  are  only  guided  by  ideal  motives,  but 
with  few,  also,  who  hearken  only  to  the  voice  of  egotism,  and 
care  for  nothing  but  themselves.  It  may,  therefore,  be  as- 
sumed, that  any  view  current  on  certain  tangible  interests 
which  concern  man  very  nearly,  and  which  has  been  shared 
by  great  parties  and  even  by  whole  peoples  for  generations,  is 
not  based  only  on  ignorance  or  a  perverse  love  of  wrong.  The 
error  consists  more  frequently  in  applying  measures  wholesome 
and  even  absolutely  necessary  under  certain  circumstances,  to 
circumstances  entirely  different.  And  here,  a  thorough  in- 
sight into  the  conditions  of  the  measure  suffices  to  compose  the 
differences  between  the  two  parties.  Once  the  natural  laws 
of  Political  Economy  are  sufficiently  known  and  recognized, 

>  Storck,  Handbuch,  II,  22  2. 


Sec.  XXVIII.J  HISTORICAL  ISIETIIOD.  1;13 

all  that  is  needed,  in  any  given  instance,  is  more  exact  and 
reliable  statistics  of  the  fact  involved,  to  reconcile  all  party 
controversies  on  questions  of  the  politics  of  public  econom}', 
so  far,  at  least,  as  these  controversies  arise  from  a  difference 
of  opinion.  It  may  be  that  science  may  never  attain  to  this, 
in  consequence  of  the  new  problems  which  are  ever  arising 
and  demanding  a  solution.  It  may  be,  too,  that  in  the  greater 
number  of  party  controversies,  the  opposed  purposes  of  the 
parties  play  a  more  important  part  even  than  the  opposed 
views.  Be  this  as  it  may,  it  is  necessary,  especially  in  an  age 
as  deeply  agitated  as  our  own,  when  every  good  citizen  is  in 
duty  bound  to  ally  himself  to  party,  that  every  honest  party- 
man  should  seek  to  secure,  amid  the  ocean  of  ephemeral  opin- 
ions, a  firm  island  of  scientific  truth,  as  universally  recognized 
as  truth  as  are  the  principles  of  mathematical  physics  by 
physicians  of  the  most  various  schools. 

SECTION   XXVIII. 

ADVANTAGES  OF  THE  HISTORICAL  METHOD. 

(COXTIXUED.) 

Another  characteristic  feature  of  the  historical  method  is 
that  it  does  away  with  the  feeling  of  sell-sufliciency,  and  the 
braggadocio  which  cause  most  men  to  ridicule  what  they  do 
not  understand,  and  the  higher  to  look  down  with  contempt  on 
lower  civilizations.  "Whoever  is  acquainted  with  the  laws  of 
the  development  of  the  }:)lant,  cannot  fail  to  see  in  the  seed  the 
germ  of  its  growth,  and  in  its  flower,  the  herald  of  decay.  If 
there  were  inhabitants  of  the  moon,  and  one  of  them  should 
visit  our  earth,  and  fmd  children  and  grown  people  side  by 
side,  while  ignorant  of  the  laws  of  human  development,  would 
he  not  look  upon  the  must  beautiful  child  as  a  mere  monster, 
with  an  enormous  head,  with  arms  and  legs  of  stunted  growth, 
useless  genitals,  and  destitute  of  reason?  The  folly  of  such  a 
judgment  would  be  obvious  to  ever}^  one;  and  yet  we  meet 
with  thousands  like  it  on  the  state  and  the  public  economy  of 
Vol.  I.— S 


114     '  INTRODUCTION.  [Ch.  III. 

nations  when  in  lower  stages  of  civilization,  and  this,  even 
amonfj  the  most  distiniruished  writers.-^ 

We  may,  indeed,  make  a  critical  comparison  of  different 
forms,  each  of  which  answers  perfectly  to  its  object  or  con- 
tents; but  such  a  comparison  can  possess  historical  object- 
ivity, only  when  it  is  based  on  a  correct  view  of  the  peculiar 
course  of  development  followed  by  the  people  in  question. 

The  forms  of  the  period  of  maturity  may  be  considered  the 
most  perfect;  earlier  forms  as  the  immature,  and  the  later  as 
those  of  the  acje  of  decline.^  But  it  is  a  matter  of  the  great- 
est  difficulty,  accurately  to  determine  the  culminating  point  of 
a  people's  civilization.  The  old  man  believes,  as  a  rule,  that 
the  times  are  growing  worse,  because  he  is  no  longer  in  a 
way  to  utilize  them;  the  young  man,  as  a  rule,  that  they  are 
growing  better,  because  he  hopes  to  turn  them  to  account. 
It  is,  however,  always  a  purely  empirical  question ;  and  in  the 
solution  of  it,  the  observer's  eye  may  acquire  a  singular  acute- 
ness  by  the  comparative  study  of  as  many  nations  as  possible, 
especially  of  those  which  have  already  passed  away.^ 

Could  anyone  contemplate  the  history  of  mankind  as  a 
a  whole,  of  which  the  histories  of  individual  nations  are  but  the 
parts,  the  successive  steps  in  the  evolution  of  humanity  would 
of  course  afford  him    a  similar  objective  rule  for  all  these 


*  Ad.  Milllcr,  an  essentially  mediceval  mind,  is  guilty  of  this  same  brag- 
gadocio in  an  opposite  direction,  when  he  calls  the  "  present  with  its  political 
disorders  simply  an  intermediate  state, —  the  transmission  of  the  natural  or 
unconscious  wisdom  of  the  fathers,  through  the  inquisitiveness  of  their  chil- 
dren to  the  rational  acknowledgment  of  that  wisdom  by  their  grandsons." 
(Theorie  des  Geldes,  iSi6,  pref.) 

2  Thus,  for  instance,  it  can  not  be  said  that  a  model  university  is  better  than 
a  model  public  school ;  and  yet  the  former  is  higher,  because  the  age  to  which 
it  is  adapted  is  doubtless  intellectually  higher. 

3  Kntcs  (Polit.  CEk.,  256  seq.)  remarks,  that  it  would  be  a  great  mistake,  and 
it  is  the  mistake  of  the  majority,  to  consider  what  has  been  achieved  or  striven 
for  in  the  present,  as  the  absolute  von  fins  tiltra,  and  thus  to  look  upon  all 
future  generations  as  called  upon  to  play  the  parts  of  apes  and  ruminators ;  a 
remark  ^Yorthy  to  be  taken  to  heart. 


I 


Sec.  XXIX.]  HISTORICAL  METHOD.  115 

points  in  which  whole  peoples  permanently  differ  from  one 
another.* 

SECTION  XXIX. 

THE     PRACTICAL    CHARACTER    OF    THE    HISTORICAL 
METHOD  IN  POLITICAL  ECONOMY. 

Before  I  close,  I  must  refer  to  a  possible  objection  which 
may  be  made  to  historical  or  physiological  Political  Economy: 
that  it  may  indeed  be  taught,  but  that  it  cannot  be  a  practical 
science.  If  it  be  assumed  that  those  principles  only  are  prac- 
tical, which  may  be  applied  immediately  by  every  reader,  in 
practice,  this  work  must  disclaim  all  pretensions  to  that  title. 
I  doubt  very  much  if,  in  this  sense,  there  is  a  single  science 
susceptible  of  a  practical  exposition.^  Genuine  practitioners^ 
who  know  life  with  its  thousands  of  relations  by  experience, 
will  be  the  first  to  grant  that  such  a  collection  of  prescriptions, 
when  the  question  is  the  knowledge  and  guidance  of  men, 
would  be  misleading  and  dangerous  in  proportion  as  such 
prescriptions  were  positive  and  apodictic,  that  is  non-practical 
and  doctrinarian. 

Our  endeavor  has  been,  not  to  write  a  practical  book,  but 
to  train  our  readers  to  be  practical.  To  this  end,  we  have 
sought  to  describe  the  laws  of  nature  which  man  cannot  con- 
trol, but,  at  most,  only  utilize.  We  call  the  attention  of  the 
reader  to  the  different  points  of  view,  from  which  every  eco- 
nomic fact  must  be  observed,  to  do  justice  to  every  claim.  We 
would  like  to  accustom  the  reader,  when  he  is  examining  the 

*  I  have,  myself,  no  doubt,  that  up  to  the  present  time,  mankind,  as  a  whole, 
has,  from  the  beginning  of  historical  knowledge,  always  advanced.  In  indi- 
vidual cases,  their  movement  has  been  interrupted  by  so  many  pauses,  and 
even  by  so  many  occasional  retrogressions,  that  great  care  must  be  taken 
not  to  infer  superior  excellence  from  mere  subsequency. 

'  Buckle  ^vTitcs  of  people  whose  knowledge  is  about  limited  to  that  which 
they  see  going  on  under  their  eyes,  and  who  are  called  practical,  only  because 
of  their  ignorance;  and  he  adds  that,  although  they  assume  to  despise  tlieqry, 
they  are  in  fact  slaves  of  theory,  of  others'  theories. 


116  INTRODUCTION.  [Ch.  III. 

most  insignificant  politico-economical  fact,  never  to  lose  sight 
of  the  whole,  not  only  of  public  economy  but  of  national  life. 
We  are  very  strongly  of  the  opinion,  that  only  he  can  form  a 
a  correct  judgment  and  defend  his  views  against  all  objections, 
on  such  questions  as  to  where,  how  and  when  certain  liens 
and  charges,  monopolies,  privileges,  services  etc.,  should  be 
abolished,  who  fully  understands  why  they  were  once  imposed 
or  introduced.  Especially,  do  we  not  desire  to  impress  a  cer- 
tain number  of  rules  of  action  on  those  who  have  confided 
themselves  to  our  guidance,  after  having  first  demonstrated 
their  excellence.  Our  highest  ambition  is  to  put  our  readers 
in  a  way  to  discover  such  rules  of  direction  for  themselves, 
after  they  have  conscientiously  weighed  all  the  facts,  untram- 
meled  by  any  earthly  authority  whatever.^  ^ 

2  Compare  this  whole  chapter  with  RoscJicr,  Leben  Werk  und  Zeitalter  des 
Thukydides,  1S42,  pp.  25,  239-275;  Roscher^  Grundries  zu  Vorlesungen  uber 
die  Staatswirthschaft  nach  geschichtlicher  Methode,  1843,  preface;  Roschcr 
Geschichte  der  Nat.  CEk.  in  Deutchland  (1874),  882  f.,  1017  seq.,  and  D.Vier- 
teljahrsschrift,  ff.  See  also  J.  Kautz's  learned  and  accurate  Theorie  und  Ge- 
schichte der  N.  CEkonomik,  vol.  I,  1858,  II,  1S60.  I  find  no  real  contradic- 
tion between  the  views  here  expressed  and  those  of  Kautz,  when  he  (I,  pp. 
313  ff.)  introduces  history  and  ethico-practical  reason  with  their  ideals  as 
sources  of  Political  Economy,  to  the  end  that  the  science  may  be  something 
more  than  simply  a  picture,  namely,  a  model  of  economic  life.  Apart  from 
the  fact  that  it  is  only  the  ethico-practical  i-eason  that  can  understand  history 
at  all,  the  ideals  of  a  period  constitute  one  of  the  most  important  elements  of 
its  history.  The  aspirations  of  an  age  find  in  them  their  best  expression. 
The  historical  political,  economist  as  such,  is  certainly  not  disinclined  to 
form  plans  of  reform,  nor  can  it  be  said  that  he  is  not  adapted  to  the  per- 
formance of  such  a  task.  Only,  he  will  scarcely  recommend  his  reforms  as 
absolutely  better  than  what  they  are  intended  to  supplant.  He  will  confine 
himself  to  showing  that  there  is  a  want  which  may,  probably,  be  best  satisfied 
by  what  he  proposes.  See  Sartorius,  Einladungsbliitter  zu  Vorlesungen  iiber 
die  Politik,  1793. 

3  "  There  is  a  book  which  youth  may  use  to  grow  old,  and  the  old  to  remain 
young — History."     {K.  S.  Zaccharia). 


BOOK  I. 


THE  PEODTJCTION  OF  GOODS. 


CHAPTER  I. 

FACTORS  OF  PRODUCTION. 


SECTION  XXX. 

MEANING  OF  PRODUCTION. 

To  create  new  matter  is  more  than  it  is  given  to  man  to  do. 
Hence,  by  the  term  production,  in  its  widest  sense,  we  mean 
simply  the  bringing  forth  of  new  goods  —  the  discovery  of  new 
utilities,  the  change  or  transformation  of  already  existing 
goods  into  new  utilities,^  the  creation  of  means  for  the  satis- 
faction of  human  wants,  out  of  the  aggregate  of  matter  origin- 
ally present  in  the  world.  {Prodiicercf)  We  confine  ourselves, 
however,  in  this  to  economic  goods,  as  defined  in  §  2.  In  a 
secondary  and  more  limited  sense,  production  is  an  increase 
of  resources,  in  so  far  as  the  goods  produced  satisfy  a  greater 
human  want,  than  those  employed  in  the  production  ^  it- 
self.^ 3* 

'  Especially  when  natural  science  begins  to  be  "  a  practical  science."  {L. 
Stein). 

2  The  difference  between  the  broader  and  narrower  sense  of  production, 
corresponds  essentially  with  that  of  gross  and  net  income  (§  145).  Compare 
also  §§  206,  2 1 1  ff. 

^Von  Mangoldt  distinguishes  the  coming  into  existence  of  free  values  of 
the  production  vindertaken  for  an  economic  purpose.     (Grundriss,  9.) 

■*  Gioja,  Nuovo  Prospetto  dellc  Scienze  economiche  (1S15),  I,  49  ft".  Besides 
positive  production,  there  is  a  latent  production,  which  prevents  the  decay  of 
goods.  It  is  not  possible  to  make  as  exact  an  estimate  of  the  latter  as 
of  the  former;  and  much  more  depends  in  the  latter  case  than  in  the  former? 
on  continuity  and  proper  extension.  Hence,  latent  production  is  especially  a 
stiite  concern.     (Kfiics,  Telegraph  als  Verkehrsmittel,  1857,  232.) 


120  PRODUCTION  OF  GOODS.  [B.  I,  Ch.  I 

It  would,  however,  be  an  error  to  suppose,  that  the  crea- 
tion of  certain  utilities  for  the  producer  himself,  or  for  oth- 
ers, constitutes  the  only  end  of  economic  production.  The 
more  perfect  economic  production  becomes,  the  greater  grows 
the  pleasure  the  producer  feels  in  his  products,  which  pleasure 
is  at  once  the  effect  and  the  cause  of  his  success.  Hence, 
production  is  to  a  great  extent  its  own  end.  That  this  is 
so  in  the  case  of  artists  is  well  known.  "  If  you  want  only 
progeny  from  her,  a  mortal  can  beget  them  as  w^ell.  Let 
him  who  rejoices  in  the  goddess,  not  seek  in  her  the  woman," 
says  Schiller.  There  is  not  a  really  clever  workman  but  has 
something  artistic  in  his  mode  of  production.  And  even  the 
meanest  productive  activity,  provided  it  is  neither  over-driven 
nor  misdirected,  must  of  itself  exert  a  good  influence  on  the 
physical  and  moral  development  or  preservation  of  the  pro- 
ducer.    An  idle  brain  is  the  devil's  workshop.^ 

SECTION  XXXI. 

THE  FACTORS  OF  PRODUCTION.— EXTERNAL  NATURE.> 

The  division  of  natural  forces  which  formerly  obtained,  into 
organic,  chemical  and  mechanical,  is  of  no  great  importance 
in  Political  Economy.  The  tendency  is  more  and  more  to  re- 
solve organic  forces  partly  into  chemical  and  partly  into  me- 
chanical. Between  mechanical  and  chemical  forces,  again,  the 
boundary  is  not  fixed,  heat  being  always  capable  of  producing 
motion,  and  motion  always  of  producing  heat.  Hence,  it  is 
all  the  more  important  for  us  to  find  a  division  of  the  economic 
gifts  (matter,  forces^  and  relations)  of  external  nature,  into  such 

8  See  Schdffie,  in  the  Tiibinger  Univ.  Programm,  September  27,  1862,  on 
the  disastrous  effect  on  the  community  of  idleness.  The  leading  of  a  happy 
life  the  Greeks  called  very  appropriately,  euTTpdzTeiV.      {Garvc). 

'  We  use  the  expression  "  external  nature  "  through  the  whole  of  this  work 
in  contradistinction  not  only  to  the  soul,  but  also  to  man's  body,  designating 
his  entire  physico-intellectual  activity  by  the  term  "  labor-force "  (Arbeits- 
kraft). 

*  By  the  expression  "  natural  forces,"  we  designate  the  economically  useful 


Sec.  XXXII.]  EXTERNAL  NATURE.  121 

as  are  capable  of  acquiring  exchange  value,  and  such  as  are 
not.    (See  §5.) 

A.  Those  gifts  of  nature  which,  because  they  cannot  be 
appropriated  by  any  one,  or  which  at  least  are  inexhaustible 
as  compared  with  the  wants  of  man,  and  therefore  never  have 
a  direct  value  in  exchange,  belong  either  to  the  class  oi  free 
goods,  in  the  fullest  sense  of  the  word,  as,  for  instance,  sunlight 
and  the  atmosphere  {supra,  §  5);^  or  they  constitute,  by  rea- 
son of  their  peculiar  and  intransmissible  connection  with  the 
whole  country,  an  essential  element  of  the  national  resources. 


SECTION  XXXII. 

EXTERNAL  NATURE.  — THE  SEA.  — CLIMATE. 

To  the  last  category  belongs,  for  instance,  the  sea,  the  only 
natural  boundary  of  a  country,  which  from  a  military  point 
of  view,  constitutes  a  protection  to  it,  without,  at  the  same 
time,  disturbing  peaceful  traffic.  {Riedel.)  Here,  also  be- 
long ocean  currents,  especially  when  uniformly  supported  by 
regular  winds,^  the  ebb  and  flow  of  the  tides,  which  consti- 

changes  of  matter,  changes  of  place  as  well  as  of  composition,  which  are 
made  without  man's  cooperation ;  for  instance,  the  gigantic  machinery  which 
supplies  the  greater  part  of  mankind  with  water  to  drink,  for  domestic  and 
other  purposes  —  the  evaporation  of  the  sea,  the  formation  of  clouds,  rain, 
springs,  rivers  etc.  See  Basitat,  Harmonies,  277.  Thus  the  sun's  rays  are 
indirectly  the  cause,  not  only  of  vegetation,  but  also  of  all  wind  and  steam 
forces. 

*  Spite  of  this  "  freedom,"  it  may  well  happen  that  these  gifts  of  nature  can 
be  utilized,  in  many  cases,  only  on  condition  of  some  expenditure.  The  pho- 
tographer can  compel  the  sunlight  to  work  for  him  only  by  means  of  a  camera 
obscvira,  and  the  smithy  the  atmosphere,  only  by  means  of  a  bellows.  But 
neither  will  ever  successfully  make  an  item,  in  their  accounts  with  their  cus- 
tomers, of  the  services  of  the  sun  or  air. 

'The  most  important  ocean  currents  may  be  explained  by  two  causes: 
the  flowing  of  the  water  from  the  polar  seas  to  the  equator  (polar  current), 
and  the  revolution  of  the  earth  about  its  axis  (equinoctial  current);  besides 
•which,  there  are  the  reflex  currents  produced  by  the  horizontal  form  of  the 


122  PRODUCTION  OF  GOODS.  [B.  I,  Cii.  I. 

tute  a  piece  of  commercial  machinery  of  the  very  greatest 
importance,  particularly  when  they  affect  the  waters  of  rivers 
to  a  great  distance.^  In  this  age,  when  the  love  of  travel  is 
so  great  and  so  universal,  what  prices  are  paid  in  many 
places  by  strangers  for  the  beauty  of  a  landscape,  to  its 
owner. 

Special  mention  should  be  here  made  of  climate,  and  of  its 
heat  or  moisture.  The  lines  called  isothermal,  that  is,  lines  of 
equal  annual  heat,  are,  therefore,  of  greatest  importance  to 
public  economy,  because  the  "  zones  of  production"  depend 
mainly  on  them.^     However,  we  are  concerned  here,  not  only 

coast-lands.  Thanks  to  these  natural  ocean  highways,  England  is  nearer  to 
almost  all  the  important  mercantile  coasts  of  the  world  by  300  geographical 
miles  than  the  Eastern  States  of  the  American  Union.  The  only  exception 
is  the  Atlantic  coast  of  America  north  of  the  Equator.  North  Americans 
to  pass  the  line,  or  to  double  one  of  the  two  great  capes,  are  obliged  first  to 
traverse  the  ocean  as  far  as  the  Azores.  On  the  other  hand,  the  western 
coast  of  South  America  is  very  widely  separated  from  Mexico,  for  instance, 
by  its  ocean  currents.  The  colonization  of  America  by  Europe,  instead  of 
by  China,  is  a  consequence  of  the  direction  of  ocean  cun-ents,  as  is  also  the 
fact  that  America  has  now  the  fairest  prospect  of  influencing  the  civilization 
of  China  and  Japan.  What  an  influence  the  warm  gulf  stream  has  on  the 
mild  climate  of  north-western  Europe ! 

2  While  the  Mississippi  has  no  ebb  or  flow  whatever,  the  influence  of  the 
ocean  is  felt  in  the  Hudson,  which  is  60  geographical  miles  long,  a  distance 
of  29  miles  from  its  mouth. 

2  Thus,  A.  2'oung,  Travels  in  France  I,  293  if.,  has  defined,  with  approxi- 
mate accuracy,  the  limits  within  which  the  vine,  maize  and  the  olive  grow. 
And  so  von  Cancrin,  Dorpater  Jahrbuch  IV,  i,  distinguishes  the  ice  zone,  the 
reindeer-moss  (a  lichen  on  which  the  reindeer  live  in  winter)  zone,  the  forest 
zone,  the  zone  within  the  limits  of  which  cattle  are  raised;  that  in  which  the 
culture  of  rye  begins,  that  in  which  it  becomes  permanent;  the  wheat,  fruit- 
tree,  vine,  maize,  olive,  sugar  cane  and  silk-worm  zones.  The  United  States 
arc  divided  into  cattle-raising,  wheat-raising,  cotton-raising,  rice-raising  and 
sugar-raising  zones.  Even  in  Europe,  beyond  the  60th  parallel  of  north  lati- 
tude, wheat  can  scarcely  be  cultivated;  the  polar  limits  of  rye  raising  extend, 
at  most,  six  or  seven  degrees  farther.  Towards  the  north,  barley  extends 
sometimes  as  far  as  the  70th  degree.  Here  agriculture  almost  ceases,  and 
the  inhabitants  are  compelled  to  confine  themselves  to  animal  substances  for 
food.  On  the  other  hand,  these  three  cereals  are  not  adapted  to  a  tropical 
climate,  while  the  bread-fruit  tree,  for  instance,  does  not  thrive  at  more  than 


Sec.  XXXII.]  EXTERNAL  NATURE.  123 

with  the  average  temperature  of  the  whole  year,  but  espe- 
cially with  the  distribution  of  heat  among  the  several  parts  of 
the  day  and  the  different  seasons  of  the  year,  and  the  maxi- 
mum summer  heat  and  winter  cold  (the  isothermal  and  iso- 
cheimenal  lines).  Coast  lands  are  wont  to  have  a  milder  winter 
and  a  cooler  summer  than  continental  ones  with  an  equal  av- 
erage yearly  heat.  This  produces  a  great  difference  in  vege- 
tation, because  there  are  a  great  many  plants  which  can  endure 
the  winter's  cold  very  well,  but  require  a  hot  summer;  and 
vice  versa.^  Were  it  not  for  this  fact,  in  connection  with  the 
winter-sleep  of  plants,  a  large  portion  of  the  north  would  be 
entirely  uninhabitable.  Besides,  the  temperature  of  a  place 
does  not  depend  exclusively  on  its  latitude,  or  on  its  height 


22  degrees  from  the  Equator,  nor  the  banana  at  more  than  35.  Compare 
Griscbach,  Die  Vegetation  der  Erde  nach  ilirer  kUmatischen  Anordnung.  II, 
1871. 

^  Thus  rje  and  Avheat  thrive  in  many  parts  of  Siberia  (lakutzk)  at  an  an- 
nual temperature  of  —  7-50,  "vvhile  in  Iceland  no  cereals  ripen  at  an  annual 
temperature  of +4°.  But  in  the  former  place  the  summer  heat  is  +  16.2°  ;  the 
•winter  cold,  —39.2°;  in  Iceland,  +12°  and  —1.6°.  In  England,  the  myrtle, 
laurel,  camelia  and  fuchsia  stand  the  winter  well ;  while  the  vine  no  where 
ripens.  On  the  other  hand,  Astrakan  and  Hungary  are  vine  growing  countries, 
although  the  former  is  as  cold  in  winter  as  North  Cape,  and  although  the 
cold  is  more  intense  in  Hungary  than  in  the  Faroe  Islands,  where  neither 
the  oak  nor  the  beech  grow  any  longer.  No  good  wine  is  produced  on  the 
western  coast  of  France,  north  of  47°  20'  north  latitude;  in  Champagne, 
north  of  49°,  or  in  the  Rheingau,  north  of  51°.  In  Norway,  the  average 
heat  is  greater  on  the  coast  than  in  the  heart  of  the  country  where,  however, 
grain  ripens,  while  it  does  not  on  the  coast;  for  the  mildness  of  the  winter, 
no  matter  how  great,  can  make  no  compensation  for  the  want  of  heat.  On 
the  other  hand,  the  cattle  on  the  coast  can  remain  inuch  longer  out  of  doors, 
and  the  sea  seldom  freezes  in  such  a  way  as  to  interfere  with  the  fisheries. 
Blom,  Norwegen  I,  39.  Boiissingtiault  (Economie  rurale  consideree  dans  ses 
Rapports  avec  la  Chimie,  II)  has  made  some  interesting  attempts  to  calculate 
by  a  mathematical  process  the  amount  of  heat  necessary  to  vegetable,  during 
the  period  of  vegetation.  Thus,  for  instance,  Avheat  requires  about  12° 
(Reaumur)  of  heat  during  140  days;  that  is,  nearly  140  x  i2°=i6So°  Reaumur. 
In  Venezuela,  the  sugar  cane  requires  a  longer  time  to  gi-ow  in  a  higher  and 
therefore  cooler  position  than  in  a  lower  and  warmer,  and  the  length  of  time 
required  is  in  proportion  to  the  height. 


124  PRODUCTION  OF  GOODS.  [B.  I,  Ch.  L 

above  the  sea-level.^  The  humidity  of  the  climate  is,  as  a  rule, 
great  in  proportion  to  the  quantity  of  water  in  its  neighbor- 
hood, and  to  the  height  of  its  temperature;  although,  for  in- 
stance, in  Europe,  the  number  of  rainy  days  increases,  the 
further  we  advance  towards  the  north.^  Although  the  dis- 
tance of  a  place  from  the  equator  and  its  height  above  the 
level  of  the  sea  have,  in  many  respects,  a  similar  effect  (verti- 
cal, horizontal  isothermal  lines  and  zones  of  production),  moun- 
tainous regions  are  uniformly  distinguished  by  a  greater 
degree  of  humidity,  which  makes  them  better  adapted  for 
pasturage  and  forest-culture.  But  the  flora  of  a  locality,  be- 
ing the  resultant  of  all  its  conditions,  affords  us  a  much  better 
criterion  of  the  value  of  the  climate  for  economic  purposes, 
than  the  most  accurate  thermometric  observations.  Other 
things  being  equal,  the  productive  force  of  nature  operates, 
doubtless,  with  most  energy,  in  warm  climates.  The  more 
remote  a  country  is  from  the  equator,  the  more  is  its  fertility 
confined  to  its  lowest  parts.''  Greater  heat  will,  as  a  rule, 
ripen  the  same  product  sooner,  and  thus  permit  the  same  land 
to  be  used  several  times  in  the  same  year.^     Each  individual 

^  Hence  it  is  that  the  isothermal  lines  are  not  parallel  with  the  equator  or 
with  one  another.  The  greater  number  of  these  have  two  northern  and  two 
southern  summits;  the  former  on  the  western  coasts  of  Europe  and  America, 
and  the  letter  in  eastern  North  America,  and  in  the  interior  of  Asia. 

^The  quantity  of  rain  which  falls  every  jear  is,  at  St.  Petersburg  and 
Pesth,  from  i6  to  17  inches; at  Berlin  19,  Mannheim  21,  Tubingen  26:  in  the 
interior  of  France  16-24;  on  the  French  coast  25,  on  the  eastern  coast  of 
England  24,  on  the  western  coast  35,  in  Milan  36,  Genoa  44,  on  the  coast  of 
most  tropical  lands  70-120.  On  the  political-economical  influences  of  most 
climates,  see  Gobbt,  Ueber  die  Abhangikeit  der  Populationskrafte  von  den 
einfachen  Grundfstoffen,  1842. 

'  The  snow  limit  at  Mageroe  in  Norway  is  2,200,  in  Iceland  2,900,  in  the 
northern  Ural  4,500,  in  the  Alps  8,200,  in  the  Caucasus  10,400,  and  Quito 
14,850  feet  high.  Hence  it  is  that  mountainous  countries  which  produce 
nothing  in  the  north,  make  magnificent  vineyards  in  warmer  countries. 

*In  central  Germany,  even  a  second  crop  can  be  produced  after  the  com 
harvest.  In  Arabia,  the  same  seed  produces  three  harvests,  because  the  grain 
which  falls  at  the  time  of  harvesting  to  the  ground,  germinates  immediately 
and  suffices  for  new  seed.     [Niebuhr,  Beschreibung,  154.) 


Sec.  XXXIL]  EXTERNAL  NATURE.  125 

harvest,  as  a  rule,  is  more  abundant,'^  and  the  products  better  in 
many  respects.  The  fruit,  for  instance,  and  wine,  contain 
more  sugar,^°  and  oleaginous  plants  contain  more  oil.  Lastly, 
since  nature  in  warm  countries  is  so  much  more  generous,  it 
may  be  utilized  by  man  with  less  regard  for  consequences. 
There  is  less  need  of  extensive  woods,  of  large  winter  sup- 
plies, especially  for  animals  ;^^  fewer  buildings  are  demanded, 
and  there  is  also  less  demand  for  human  and  brute  labor,  since 
the  work  of  plowing,  sowing  etc.,  extends  over  a  greater  por- 
tion of  the  year.^^     It  is  true,  on  the  other  hand,  that  also  the 

9  Thus  in  the  northern  states  of  the  American  union,  -wheat  yields  a  return 
of  only  from  four  to  five  times  the  amount  sown ;  in  France,  5-6  times  (La- 
voisier): in  Chili,  12  times;  in  northern  Mexico,  17  times;  in  Peru,  iS  and 
20  times;  in  southern  Mexico,  25  and  even  35  times;  in  Germany,  maize 
seed  yields  at  best  one  hundred  fold,  while  in  the  torrid  zone  there  is  a  return 
of  from  three  hundred  to  four  hundred  fold,  generally. 

1"  Andalusian  corn  produces  in  the  mill  only  one-half  as  much  bran-waste 
as  Baltic  wheat  produces.  Bourgoing^H^^A&7)^x  de  I'Espagne,  II,  155.  Bal- 
tic wheat  contains  6-7  per  cent,  of  azote,  and  Algerian,  20-25  per  cent. 
(KabscJi,   Pflanzenleben  der  Erde,  1S65.) 

"  In  Europe  the  blossoming  season  is  retarded  four  days  for  each  degree 
of  northern  latitude.  (SchUbler.)  As  we  advance  towards  the  north,  the  dif- 
ference becomes  less  noticeable,  but  more  so  as  we  go  towards  the  south.  In 
mountainous  countries  a  similar  difference  is  observable,  produced  by  a  like 
climatic  influence.  It  is  from  about  10  to  12  days,  for  a  heighth  of  from  500 
to  600  feet.  (  Wolff,  Naturgesetzliche  Grundlagen  des  Ackerbaues  I,  p.  332  ft") 
In  the  cantons,  in  which  the  Swiss  confederation  had  its  origin,  the  pasturage 
of  the  Alps  lasts  generally  thirteen  weeks,  but  in  the  higher  Alps  it  lasts 
only  from  six  to  seven  weeks.     (Dusingcr,  C.  Unterwalden,  p.  52.) 

'■'  In  central  Italy,  winter  wheat  may  be  sown  in  October,  November  or  De- 
cember ;  summer  Avheat,  in  February  or  March.  (Sismondi,  Tableau  de  I'Ag- 
riculture  Toscane,  p.  35.)  In  Judiea,  it  was  possible  to  harvest  figs  ten 
months  in  the  year.  (Josefh,  Bell.  Jud.,  Ill,  p.  10.)  On  the  other  hand, 
there  is  Jemtland,  where  the  peasant  in  many  places  surrounds  the  northern 
portion  of  his  cornfield  with  lagots,  and  lights  them  in  August  when  the 
north  wind  blows,  to  protect  his  land  from  the  fi'ost;  and  where  the  expression 
"green  years"  is  used  to  designate  those  in  which  the  harvest  has  to  be 
reaped  before  it  is  ripe.  {Forsell,  Stntistik  you  Schwedcn,  24.)  In  the  valu- 
ation made  of  the  lands  of  the  kingdom  of  Saxony,  for  assessment  purposes, 
the  cost  of  supporting  a  yoke  of  oxen  in  the  lowest  country  is  estimated  at 
only  three-fourths  of  what  it  is  iu  tlic  highest  localities,  because  in  the  for- 
mer, 200  work  days  can  be  calculated  upon  in  the  year,  in  the  latter  only  159. 


126  PRODUCTION  OF  GOODS.  [B.  I,  Cii.  I. 

destructive  force  of  nature  is  greater  in  warmer  than  in  colder 
countries.  (§  209.)^^ 

SECTION  XXXIII. 

EXTERNAL  NATURE.  — GIFTS  OF  NATURE  WITH  VALUE  IN 

EXCHANGE. 

B.  Those  gifts  of  external  nature  which  may  become  ob- 
jects of  private  property,  and  at  the  same  time  possess  suffi- 
cient relative  scarcity  to  give  them  value  in  exchange,  are 
either  movable,  and  exhaustible  in  a  given  place,  or  firmly 
connected  with  the  land.  The  first  category  embraces,  for 
instance,  such  wild  animals  and  plants  as  serve  some  useful 
purpose,  minerals,  above  all,  fossil  combustible  matter^ — the 

In  central  Russia,  the  greater  part  of  the  labor  of  agriculture,  sowing  and 
harvesting,  has  to  be  finished  within  the  space  of  four  months.  In  central 
Germany,  they  are  spread  over  seven  months.  Other  things  being  equal, 
seven  horses  and  ploughmen  are  needed  in  Russia  where  only  four  are  called 
for  in  central  Germany,  {von  Haxthausen^  Studien  I,  174.)  On  the  impedi- 
ments put  in  the  way  of  agriculture  by  the  climate  of  eastern  Prussia,  see  Meit- 
zen,  Boden  und  landwirthsch.  Verbal tnisse  des  preussichen  Staats,  1868, 
I,  Abschn.,  6. 

'3 "  In  both  hemispheres,  the  zone  in  which  the  temperature  decreases  most 
rapidly  lies  between  the  40th  and  50th  degrees  of  north  latitude.  This  cir- 
cumstance must  have  a  happy  influence  on  the  culture  and  industry  of  the 
nation  inhabiting  the  neighborhood  of  that  zone.  Here  is  rhe  point  where 
the  regions  of  the  vine  touch  upon  those  of  the  olive.  Nowhere  in  the 
world,  do  the  products  of  the  vegetable  kingdom,  and  the  most  varied  won- 
ders of  agriculture,  follow  with  such  rapidity  on  one  another.  The  great  va- 
riety of  products  enlivens  the  commerce  and  increases  the  industrial  activity 
of  agricultural  nations."  {Htunboldt!)  It  is  true,  however,  that  tropical 
countries  possess,  also,  in  their  mountainous  parts,  the  tierra  fria,  tonplada 
and  caliente,  superimposed  the  one  on  the  other. 

'The  aggregate  coal  supply  of  Great  Britain  (1869)  was  2,180  millions  cwt.; 
of  Belgium  (1862),  207  miUions;  of  France  (1868)  256  millions;  of  Prussia 
(1870),  600  millions,  of  Austria  (1870),  including  brown  lignite  coal,  158  mil- 
lions ;  of  Russia  (1868),  only  a  little  over  9  millions.  The  great  English  coal 
field,  in  the  counties  of  Durham  and  Northumberland,  embraces  732  English 
square  miles;  that  of  South  Wales,  1,200,  with  a  depth  of  95  feet,  so  that  the 
geographical  square  mile  contains  here  679  millions  of  tons,  each  of  twenty 


Sec.  XXXIIL]  EXTERNAL  NATURE.  127 

"black  diamonds,"  coal,  of  which,  with  its  canals,  Franklin 
said  that  it  had  made  England  what  it  is.  The  economical 
effect  of  their  moveable  character  is  best  seen,  when  the  use 
made  of  an  ordinary  stratum  of  coal  is  compared  with  that  of 
a  protracted  subterranean  fire  in  a  coal  mine.-  The  latter  can 
be  directly  useful  only  to  those  in  its  immediate  vicinity. 
Every  lower  layer  of  the  burning  coal  would  be  less  useful. 
An  increase  of  its  actual  power  by  accumulation  in  time  or 
place  is  scarcely  possible.  In  all  these  respects,  the  movable 
coal  is  incomparably  better  adapted  to  the  satisfaction  of  man's 
WMnts.  It  may  be  said  that  the  capacity  of  heat  for  drying, 
distilling,  melting  and  hardening  purposes,  of  imparting  rapid 
motion  to  heavy  objects  by  the  production  of  confined  steam, 
is,  at  least,  a  thousand  times  as  great  when  a  thousand  bushels 
of  coal  are  consumed  as  when  one  is  consumed.  In  most  cases 
even  the  concentration  of  a  large  quantity  of  coal  will  increase, 
the  result  not  only  absolutely,  but  relatively.  ^  ■* 

cwt.  To  obtain  the  same  quantity  of  combustible  material  as  was  furnished 
to  Prussia,  in  1865,  by  its  coal,  it  would  be  necessary  to  use  up  6,331  square 
miles  of  forest.  (vo7i  Dechen,  in  EngeVs  Zeitschrift,  1867,  25S.)  The  supply 
of  coal  is,  of  course,  exhaustible  while,  for  instance,  turf-fields  replace  them- 
selves by  slow  degrees.  Compare  Gnesbacfi,  iiber  die  Bildung  des  Torfs,  in 
the  Gottinger  Studien,  1S45,  vol.  I.  The  importance  of  the  coal-fields  of  the 
United  States,  which  are  twenty-two  times  as  large  as  those  of  Great  Britain, 
in  the  distant  future,  cannot  be  over-estimated. 

^  I  need  only  call  attention  to  the  earth-fire  (Erdbrand)  for  the  purpose  of 
forcing  the  growth  of  garden  plants  in  the  neighborhood  of  Zwickau,  which 
is  said  to  have  existed  since  1505. 

3  Thus,  in  Watt's  steam  engines  of  the  larger  kind,  an  hourly  consumption 
of  ten  pounds  of  coal  is  needed  to  produce  a  force  equivalent  to  that  of  one 
horse,  while  in  the  smallest  machines  of  only  one  horse  power,  twenty-two 
pounds  are  needed.     See  Prccktl,  Technolo.  Encyklopadie,  III,  669. 

•*  It  is  easy  to  see  that  it  is  the  most  important  substances  needed  in  indus- 
try which  are  mentioned  in  this  section.  Many  political  economists  have 
considered  the  principal  difference  between  agriculture  and  the  industries 
and  economies  of  towns  to  lie  in  the  contrast  here  referred  to.  Thus,  A. 
Serra,  Sulle  Cause  che  possono  far  abbondare  li  Regni  d'oro  c  d'argento, 
dove  non  sono  miniere,  1613,  I,  3.  See  the  description  of  the  diflerence  be- 
tween land  and  machines  in  Malthus,  Principles,  III,  5;  Senior,  Outlines,  86. 
But  it  is  nothing  more  than  a  difference  of  gradation.    Even  in  the  most 


128  PRODUCTION  OF  GOODS.  [B.  I,  Ch.  I 


SECTION  XXXIV. 

EXTERNAL  NATURE. 

(CONTINnKD.) 

The  materials,  forces  and  relations  or  conditions  of  external 
nature,  immovably  connected  with  parts  of  the  land,  even 
when  in  themselves  exhaustless,  either  allow  only  of  a  definite 
amount  of  economic  utilization,  as,  for  instance,  the  mechanical 
force  of  a  given  waterfall,  which  can  drive  only  a  definite  num- 
ber of  miUs  of  a  definite  size ;  ^  or  their  increased  utilization  is 
accompanied  by  difficulties  which  increase  with  stiU  greater 
rapidity.  This  last  is  the  case,  especially  in  the  employment 
of  land  for  agricultural  purposes.  It  is,  according  to  Senior, 
one  of  the  four  fundamental  axioms  of  Political  Economy,  that 
additional  labor,  spent  on  a  given  quantity  of  land,  produces, 
as  a  rule,  a  relatively  smaller  yield ;  assuming,  of  course,  that 
the  art  of  agriculture  remains  the  same.^     It  is  not  possible  to 

active  of  businesses  there  is  a  limit  which  the  accumulation  of  means  of 
production  cannot  pass  without  a  relative  diminution  of  the  income.  This 
boundary  is  imposed  by  the  limited  nature  of  those  organic  beings  which 
must  contribute  to  production  either  actively  or  passively.  Thus,  for  in- 
stance, a  manufacturing  establishment  or  commercial  business  can  be  en- 
larged with  advantage  only  so  long  as  it  is  still  possible  for  one  superintend- 
ent to  conduct  it.  And  so,  when  cattle  are  furnished  with  very  abundant 
and  substantial  food,  a  pound  of  meat  costs  the  producer  a  much  higher 
price  than  when  they  are  more  moderately  supplied :  sometimes  in  the  ratio 
of  1.95:0.98.  Bousstiigaiilt,  Economic  rurale,  II.  Where  there  is  absolute 
over-feeding,  the  producer  must  suffer  loss.  But,  even  inorganic  nature  im- 
poses its  own  limits  here ;  as,  for  instance,  when  ships,  machines  etc.,  on  ac- 
count of  the  insufficient  sfa-ength  of  the  materials  of  which  they  are  made, 
cannot  be  constructed  beyond  a  certain  size.  But  all  these  limits  are  much 
narrower  than  those  imposed  by  the  quality  of  immovability. 

'  Senior,  Outlines,  26,  81  ff.  See  Ste-wart,  Principles,  II,  ch.  11 ;  Orles,  E. 
N.,  I,  18,  II,  18  ft'.  This  most  important  principle  in  Political  Economy  is 
thus  illustrated  by  yohn  Stuart  Mill,  Principles,  book  I,  ch.  12.  "The  limi- 
tation to  production  from  the  properties  of  the  soil  is  not  like  the  obstacle 
opposed  by  a  wall,  which  stands  immovable  in  one  particular  spot,  and  offers 
no  hindrance  to  motion  short  of  stopping  it  entirely.  We  may  rather  com- 
pare it  to  a  highly  elastic  and  extendible  band,  which  is  hardly  ever  so  vio- 


Sec.  XXXIV.]  EXTERNAL  NxVTURE.  129 

determine  either  generally,  or  in  particular  cases,  the  precise 
point  at  which  agriculture  should  stop,  to  prevent  relatively 
smaller  returns  from  increased  expenditure  of  labor  and  capi- 
tal. Improvements  in  the  art  of  agriculture  may  remove  it  a 
great  distance.  But,  that  there  is  such  a  point  admits  of  no 
doubt.  No  one  will  believe  that  an  acre  of  land  can  be  made 
to  produce  a  quantity  of  the  means  of  subsistence  sufficient  to 
support  all  Europe,  no  matter  what  the  amount  of  seed  used, 
or  of  manure  etc.  employed.^  This  is  most  apparent  in  forest- 
economy,  where  the  absolute  increase  of  the  so-called  wood- 
capital  becomes,  after  a  certain  time,  smaller  from  year  to 
year.^ 

lentlj  stretched,  that  it  could  not  possibly  be  stretched  any  more,  yet  the 
pressure  of  which  is  felt  long  before  the  final  limit  is  reached,  and  felt  more 
severely  the  nearer  that  limit  is  approached."  This  is,  if  possible,  more  ob- 
vious in  building  than  in  agriculture,  both  as  to  the  construction  of  new 
stories  and  the  excavation  of  deeper  cellars. 

^  Ad.  Mayer,  Das  Diingerkapital  und  der  Raubbau  (Heidelberg,  1S69),  sees 
the  only  conditions  of  production  which  man  cannot  increase  at  will  exclu- 
sively in  the  sun's  rays,  the  employment  of  which  also  depends  on  the  quan- 
tity of  land.     Thus  would  he  explain  Senior^s  law. 

^  See  the  tables  of  increase  in  Coda,  Anweisung  zum  Waldbau,  p.  22S. 
Count  Biiquoy,  Theorie  der  N.  Wirthschaft,  p.  54,  ridicules  the  absurd  pro- 
cedure of  a  great  many  farmers,  as  if  by  forcing  the  ploughshare  deeper  into 
the  soil,  they  could  compel  it  to  produce  a  double  return,  and  asks :  if  one 
should  dig  a  square  foot  of  land  to  the  center  of  the  earth  and  manure  it,  who 
would  take  it  off  his  hands.'  As  to  the  effect  of  manure,  KuJilmaiui's  investi- 
gations have  shown  that  300  kilograhimes  of  guano  produced  in  three  years 
an  increase  per  hectare  in  the  yield,  of  2,469  kilogrammes  of  hay ;  while  600 
kilogrammes  produced  an  increase  of  only  2,870  kilogrammes.  Schiiblcr, 
found  that  where  salt  had  been  used  for  manuring  purposes,  40  kilogrammes 
produced  a  maximum  of  fertility  from  which  point  forward  every  increase 
in  the  amount  of  salt  was  attended  by  diminished  returns,  and  finally  led  to 
complete  barrenness.  See  Wolff,  Naturgesetzliche  Grundlagen,  I,  40S,  412, 
502.  Constantly  increased  irrigation  would  convert  the  land  into  a  swamp 
instead  of  indefinitely  adding  to  its  fertility.  Nor  can  abundant  sowing  be 
of  any  use  when  it  reaches  such  a  point  that  the  plants  stand  so  closely  to- 
gether as  to  interfere  with  their  proper  development. 
Vol.  I.  —  9 


130  PRODUCTION  OF  GOODS.  [B.  I,  Ch.  I. 


SECTION  XXXV. 

EXTERNAL  NATURE.  —  ELEMENTS  OF  AGRICULURAL 
PRODUCTIVENESS. 

In  treating  of  the  agricultural  productiveness  of  a  piece  of 
land,  it  is  necessary  to  distinguish  three  things,  — its  bearing- 
capacity,  its  capacity  for  cultivation,  and  its  direct  capacity  to 
afford  food  to  plants.^  Plants  grow  by  drawing  a  part  of  the 
elements  which  enter  into  their  composition  from  the  atmos- 
phere, and  a  part  from  the  earth  through  the  agencies  of  sun- 
light and  of  water.  While  the  air,  the  sun's  heat,  and  in  most 
parts  of  the  world,  water,  are  free  and  inexhaustible  goods, 
the  earth's  supply  of  food  for  plants  must  be  considered  as  an- 
alogous, so  far  as  its  exhaustibility  and  capacity  to  be  appro- 
priated are  concerned,  to  the  beds  of  coal  and  of  ore  etc.  which 
occur  in  mining  districts.  This  is  certainly  true,  with  a  few 
important  differences,  however,  as  for  instance,  that,  as  a  rule, 
it  is  impossible,  except  through  the  cultivation  of  plants,  to  ob- 
tain from  the  earth  the  stores  of  plant  food  which  it  contains ;  ^ 
and  that  it  is  possible  to  husbandry  to  replace  the  portion  of 
these  stores  taken  from  the  earth  by  the  harvest,  through  the 
agency  of  manures.^ 

Incomparably  more  important  in  the  economic  valuation  of 
a  piece  of  land  is  its  capacity  for  cultivation,  because  this  de- 

'  These  differences  correspond  with  the  differences  in  the  kinds  of  deterio- 
ration to  which  land  is  liable  from  rivers,  floods,  lava,  etc.,  soiI-exhausti:)n, 
and  the  growing  wild  of  the  land. 

2  From  a  technic  point  of  view,  it  would,  perhaps,  be  practicable,  in  most 
instances,  to  obtain  the  phosphoric  acid  immediately  from  the  land  and 
transfer  it  to  other  land ;  but  the  relation  of  the  cost  to  the  result  makes  it 
impossible  from  an  economical  point  of  view. 

3  It  most  certainly  is  always  an  uncommon  advantage  that  certain  kinds 
of  soil,  rich  in  kali  and  decayed  vegetable  matter,  yield  a  long  series  of  har- 
vests without  the  addition  of  manure,  provided,  always,  that  a  short  interval 
is  allowed  to  the  process  of  decay  to  replace  the  exhausted  plant-food.  Thus 
in  many  volcanic  regions.  Compare  on  similar  districts  in  the  Deccan: 
Rittcr,  Erdkunde,  V,  714. 


Sec.  XXXV.]  EXTERNAL  NATURE.  131 

pends  much  less  on  the  good  or  bad  quality  of  the  husband- 
man's art.  I  mean  here  the  so-called  ph3'sical  constitution  of 
of  the  vegetable  soil;  its  water-holding  power,  its  consistency 
(light  or  heavy  soil)  on  which  the  difficulty  of  working  it  de- 
pends; its  ability  to  dry,  in  a  shorter  or  longer  time,  and  its 
accompanying  diminution  in  volume ;  its  ability  to  draw  mois- 
ture from  the  atmosphere  and  to  absorb  the  various  kinds  of 
gases;  its  heat-absorbing  and  heat-containing  power  (hot, 
warm  and  cold  soils).^  Much  depends  here  on  the  depth  of 
the  vegetable  soil  and  on  the  constitution  of  the  sub-soil, 
which,  for  instance,  when  it  is  very  permeable,  improves  a 
very  moist  soil,  but  in  the  form  of  meadow  iron-ore  (  Wicsen- 
erz),  works  great  injury.  The  vertical  form  of  the  land  is 
also  a  very  important  element  in  estimating  the  natural  fertil- 
ity of  the  soil.  In  mountainous  districts,  the  quantity  of  land 
w^hich  can  be  used  (and  with  what  labor!)  is  wont  to  be  rela- 
tively smaller  than  in  low  lands.  Hence  it  is,  that  the  form- 
er become  too  small  for  their  inhabitants;  who,  therefore, 
swarm  over  the  plains  lying  before  them  either  as  settlers  or 
conquerors.*    In  the  eastern  hemisphere,  the  northern  slopes 

*  According  to  Schiibler,  the  absorption  of  water  by  loo  parts  of  earth  is,  in 
the  case  of  quartz-sand,  25  per  cent,  of  its  weight;  for  clay,  70  per  cent.;  for 
calcareous  earth,  85  per  cent. ;  humus,  190  per  cent. ;  and  for  100  parts  of 
their  value,  respectively,  37.9,  66.2,  and  69.2  per  cent.  The  consistency  of 
the  four  kinds  of  earth,  in  a  dry  state,  is  in  the  proportion  of  0.100,  5,  8.7; 
their  adhesion  in  a  moist  state,  to  iron  agricultural  implements,  is  in  that  of 
0.17,  1. 12,  0.65,  0.40.  ,Of  100  parts  of  water  mixed  with  these  kinds  of  earth, 
the  evaporation  in  four  hours,  at  a  temperature  of  iS°  75'  (centigrade)  is 
8S.4,  31.3,  28  and  20.5  per  cent,  respectively.  The  diminution  of  volume 
when  the  moist  earth  dries,  under  the  same  degree  of  temperature,  is,  o, 
18.3,  5  and  20.  Their  relative  absorption  of  atmospheric  moisture  for  48 
hours  is  as  o,  24,  17.5  and  55;  their  absorption  of  oxygen  in  30  daj-s  is 
respectively  1.6,  15.3,  lo.S  and  2.03  per  cent;  and,  lastly,  their  heat-holding 
power  is  in  the  ratio  of  95.6,  66.7,  61.S,  49. 

5  In  Austria,  below  the  Enns,  only  3.8  per  cent,  of  the  soil  is  barren ;  in 
the  Tyrol,  29  per  cent. ;  in  Dalmatia,  48.1  per  cent.  (Springer).  In  the  French 
Pyrenees,  43  per  cent,  is  considered  incapable  of  cultivation ;  in  tiie  Alps,  in 
Landes  and  Morbihan,  42  per  cent. ;  in  the  departments  of  Nord  and  Sommc, 
1.3  per  cent.  (Schnitzlcr).    Franscini  considers  36  per  cent,  of  Switzerland 


132  PRODUCTION  OF  GOODS.  [B.  I,  Ch.  I. 

of  mountain  regions  are  most  unfavorably  situated,  although 
the  southern  slopes  are  frequently  subjected  to  more  trying 
and  more  sudden  variations  of  thawing  and  freezing  weather.^ 
But  all  these  more  special  qualities  of  the  soil  must  be  dis- 
tinguished from  their  general  basis,  the  bearing  or  carrying  ca- 
pacity which  land  possesses  as  a  mere  superficies,  and  which 
the  most  naked  rock  (Malta!),  and  the  bed  of  a  flowing 
stream  (the  floating  gardens  of  China!)  possess  to  some  ex- 
tent, since  there  is  a  possibility  of  establishing  a  plant-feeding 
surface  on  them.  This  bearing  capacity,  which  in  most  in- 
stances is  given  only  by  nature,  and  which  can  be  added  to 
only  to  a  very  limited  extent  and  at  great  outlay,  is  wont, 
when  the  population  is  very  dense,  to  acquire  considerable  ex- 
change value  in  the  vicinity.''^ 

unfit  for  tillage.  The  idea  "barren"  is  a  very  vague  one,  and  hence  a  com- 
parison of  different  countries  on  this  point  should  not  be  made  without  great 
caution. 

*  Wolff',  loc.  cit,  353  ff.  As  to  the  manner  in  vrhich  soil  and  climate  mutually 
improve  or  injure  one  another,  see  Schiverz,  Prackt.  Ackerbau  I,  12. 

"^  In  this  respect,  also,  the  fundamental  difference  between  agriculture  and 
industry  is  very  important,  inasmuch  as  the  products  of  the  former,  equal  in 
value  to  those  of  the  latter,  require  a  very  large  supporting  or  bearing  sur- 
face ;  those  of  industry,  a  very  small  one.  If  JVobbe's  "  water-cultivation  " 
should  ever  come  to  assume  any  great  practical  importance,  agriculture 
would  approach  to  industry  in  this  respect. 

8  Wolkoff  has  called  special  attention  to  mere  emplacejncnt :  Lectures 
d'Economie  politique  rationelle  (1861),  pp.  90  seq.,  157  seq.  Bastiafs  rather 
broad  and  enthusiastic  assertion,  that  no  mere  product  of  nature  possesses 
value  (in  contradistinction  to  utility),  an  exaggeration  of  his  very  honorable 
contest  with  the  socialists  (1848!),  is  refuted  by  daily  experience,  as  when, 
for  instance,  discoveries  are  made  accidentally  of  metallic  veins,  coal-fields 
etc.,  which  immediately  acquire  great  exchange  value. 


Sec.  XXXVI  .1  EXTERNAL  NATURE.  133 


SECTION  XXXVI. 

EXTERNAL  NATURE.— FURTHER  DIVISIONS  OF  NATURE'S 

GIFTS. 

The  gifts  of  nature,  we  further  divide  into  those  which  can 
be  directly  enjoyed  and  those  which  are  of  use  only  indirectly, 
by  facilitating  production.  (Natural  means  of  enjoyment, — 
means  of  acquisition.)^  An  extreme  superfluity  of  the  former 
is  as  disastrous  to  civilization  as  a  too  great  scarcity  of  them. 
How  simple  the  economy  of  a  tropical  country!  A  banana 
field  will  support  twenty-five  times  as  many  men  as  a  wheat 
field  (/r.  Ritter)\  and  with  infinitely  less  labor;  for  all  that 
is  needed  is  to  cut  the  stems  with  their  ripened  fruit,  to 
loosen  the  earth  a  little  and  very  superficially,  when  new 
stems  shoot  up.^  At  the  base  of  the  mountains  of  Mexico,  a 
father  needs  labor  only  two  days  in  the  week  to  support  his 
family.  Hence,  nothing  so  much  excites  the  wonder  of  the 
traveler  there  as  the  diminutiveness  of  the  cultivated  ground 
surrounding  each  Indian  hut.^     But  in  these  earthly  paradises, 

'  Aristotle  distinguishes  between  dazolauaTUa  and  xdp7lC[ia.  (Rhet.,  I,  5.) 
'  Humboldt^  Essai  politique,  sur  la  N.  Espagne,  IV,  9,  in  which  he  estimates 
ihe  relation  of  the  culture  of  the  banana  to  that  of  wheat,  in  respect  of  mere 
quantity,  to  be  as  4,000  to  30, —  "  probably  the  best  gift  of  nature  to  awaken- 
ing man,  and  the  object  of  the  most  ancient  cultivation." 

^  It  was  said  that  in  Easter  Island,  three  days'  labor  sufficed  for  a  man's 
maintenance  through  the  whole  year.  A  similar  gift  of  nature  to  tropical 
lands  is  the  date  tree.  It  is  turned  to  so  many  different  uses  that  the  Arabs 
of  the  coast  of  the  Persian  Gulf  say  that  it  is  possible  to  construct  a  ship, 
rig  it,  supply  and  freight  it,  from  date  trees.  Houses  are  built  of  palm  wood, 
covered  with  palm  leaves,  furnished  with  palm  mats,  lighted  with  palm  chips, 
and  heated  with  palm  coals.  The  whole  architecture  of  these  countries  is  fash- 
ioned by  the  date  tree.  Date  wine  is  the  favorite  intoxicating  beverage.  There 
is  a  proverb  current  there  that  a  good  housewife  can  vary  the  preparation  of 
the  date  for  her  guests  every  day  in  the  month.  Even  the  pulp  is  eaten. 
Each  tree  yields  an  average  of  50-250  lbs.  of  dates;  and  a  tree  may  last  over 
200  years.  An  acre  may  contain  more  than  200  trees.  The  labor  of  cultiva- 
tion is  very  slight,  although  it  demands  more  care  than  the  banana.  Com- 
pare Ritter.,  Brdkunde,  XII,  763.    An  acre  planted  with  the  sago-palm  yields 


134  PRODUCTION  OF  GOODS.  [B.  I,  Ch.  I. 

where,  as  Byron  said,  even  bread  is  gathered  like  fruit,  the 
powers  of  man  slumber  as  certainly  as  they  grow  torpid  in 
polar  deserts.*  The  sentence :  "  In  the  sweat  of  thy  brow  shalt 
thou  eat  bread,"  has  been  a  blessing  to  mankind.  Athens  was 
not  only  the  literary  and  political,  but  also  the  economic  capi- 
tal of  Greece ;  and  yet  Attica  was  one  of  the  most  sterile  coun- 
tries in  the  world.^  Unfortunate  Messina,  on  the  other  hand, 
was  the  most  fertile  province  of  Greece.  In  modern  times,  no 
countries  of  equal  extent  have  produced  as  many  great  captains, 
statesmen,  savants  and  artists  as  Holland,  whose  securest  por- 
tions are  as  unfertile  as  those  which  are  fertile  are  threatened 
by  the  sea.  On  the  other  hand,  how  lately  and  imperfectly 
has  the  so-called  black-earth  of  southern  Russia  fallen  under 
the  influence  of  civilization !  ^ 

as  much  nourishment  as  163  acres  of  wheat  land.  (Reise  der  Frigatte  No- 
vara,  II,  113. 

*See  D.  Hume,  Discourses  No.  I  (On  Commerce),  While  in  hot  coun- 
tries "  the  sun  does  more  work  for  man,  it  diminishes  human  strength  itself." 
(M.  Wirth.)  That,  however,  such  people,  to  their  surplus  of  the  natural 
means  of  enjoyment  and  the  consequent  laziness  and  absence  of  care,  add 
the  bright  side  of  a  joyous  disposition,  is  well  shown  by  Goethe,  Werke  (16 
mo.,  1840),  XXIII,  246. 

5  Noticed  even  by  Thucyd.,  I,  2.  See  also  Euripides'  comparison  of  Sparta 
and  Messina,  in  Strabo,  VIII,  366. 

•^  We  find,  in  a  great  many  countries,  that  their  northern  portions  are  en- 
dowed more  sparingly  by  nature  with  means  of  enjoyment  (Genusstnittcln) 
than  southern  portions,  but  more  abundantly  with  means  of  acquisition.  (Er- 
iverbsmittcln.)  Hence,  the  former  are  latest  to  develop ;  but  once  developed, 
they  assume  a  much  higher  place  in  civilization  than  the  latter.  This  is  true 
of  Italy,  Spain,  Portugal,  France,  the  Netherlands,  and  the  United  States, 
and  of  North  America  in  general,  as  compared  with  South  America.  Some- 
thing similar  may  be  seen  in  the  contrast  between  Austria  and  Prussia. 
The  latter  is  colder  and  less  fertile,  but  far  superior  to  the  former  in  extent 
of  coast,  in  rivers,  and  fossilized  combustible  matter. 


Sec.  XXXVII.]  EXTERNAL  NATURE.  135 


SECTION  XXXVII.  • 

EXTERNAL  NATURE.  — THE  GEOGRAPHICAL  CHARACTER 
OF  A  COUNTRY. 

The  geographical  character  of  a  country  is,  as  a  rule,^  most 
intimately  connected,  not  only  with  its  flora  and  fauna,  but  also 
with  the  character  of  its  people.  One  of  the  crowning  glories 
of  the  progress  of  modern  science  is,  that  it  has  recognized 
anew  the  power  of  this  wonderful  organism,  and  that  it  has 
made  geography  an  explanatory  medium  between  nature  and 
history.  The  conditions  most  favorable  to  the  development  of 
civilization  are  found  in  a  well  developed  country  which  slopes 
gradually  through  a  series  of  intermediate  terraces  from  a 
mountain  summit  to  a  plain;  especially  when  they  are  con- 
nected with  one  another  by  a  good  system  of  streams ;  since 
here  the  opposite  peculiarities  of  the  populations  of  the  high- 
lands and  coast-lands  ^  tend  to  produce  a  nationality  both  one 
and  varied.  Where  the  transitions  are  too  abrupt,  as  for  in- 
stance, in  New  Holland,  they  easily  impede  inter-communica- 
tion ;  and,  still  more,  where  the  several  parts  of  the  country 
are  of  very  great  extent;  as,  for  example,  the  desert  of  North 
Africa,  the  plateau  of  South  Africa  or  that  of  Central  Asia. 
Europe  is  favored  above  all  other  parts  of  the  world  by  the 
happy  combination  of  mountain  and  plain.^  "We  might  pur- 
sue the  parallel  existing  between  the  soil  and  the  character  of 
a  people  into  the  minutest  details,  and  discover,  even  in  the 

*  The  rule  is  not  without  its  exceptions.  Thus,  for  instance,  Borneo  and 
New  Guinea  are  physically  very  like  each  other,  but  zoologically  two  dif- 
ferent worlds ;  the  former  belonging  to  India  and  the  latter  to  Australia. 

*  Even  language,  which  is  the  most  general  and  most  accurate  expression 
of  the  intellectual  genius  of  a  people,  presents  a  strikingly  analogous  con- 
trast in  mountainous  and  coast  countries.  Thus,  compare  the  Ionic,  Latin, 
Low  German,  Danish  and  Portuguese,  with  the  Doric,  Oscan,  High  Ger- 
man, Swedish  and  Spanish. 

^  See  Strabo^  II,  136.  seq. 


136  PRODUCTION  OF  GOODS.  [B.  I,  Cn.  I. 

difference  between  Spanish,  French,  German  and  Hungarian 
wines,  a  reflection  of  the  different  characters  of  the  people.* 

But  whence  is  this?  Can  it  be  that  dead  nature  has  thus 
irresistibly  affected  the  living  mind?  We  do  not  need  to  give 
a  materialistic  answer  to  the  question.^  Almost  every  people 
has  migrated  at  some  period  of  its  existence.  Urged  on  by 
their  peculiar  tastes  and  tendencies,  they  settled  in  the  places 
most  in  harmony  with  their  character.  A  higher  hand  was 
over  them;  one  which,  we  should  unreservedly  trust,  placed 
them  in  such  external  circumstances  as  were  most  favorable 
to  the  development  of  all  their  faculties. 

But  the  influences  of  man  on  nature  are  no  less  notable  than 
those  of  nature  upon  man.  The  greater  number  of  domestic 
animals  and  plants  which  Europe  posesses  to-day,  it  has  been 
obliged  to  introduce  from  other  parts  of  the  globe.^  In  the 
interior  of  Gaul,  the  vine  rarely  ripened,  at  the  time  of  Christ.' 
On  the  other  hand,  Mesopotamia,  formerly  one  of  the  gardens 

*  The  most  striking  instance,  illustrative  of  the  manner  in  which  the  na- 
ture of  a  country  influences  the  character  of  a  people  is  afibrded  by  the  dif- 
ference in  the  development  of  the  Aryans  in  India  and  Persia,  especially 
when  their  sojourn  in  the  territory  of  the  Indus  before  that  near  the  Ganges 
is  looked  upon  as  an  intermediate  stage. 

*  French  writers,  especially,  have  exaggerated  the  influence  of  nature  over 
man.  Thus,  Bodin,  de  Repub.  (1584),  V,  i;  Alonicsquicu,  Esprit  des  Lois, 
XVII,  6.  XVIII,  1,18.  Cadatiis,  Rapport  du  Physique  et  du  Moral  de 
I'Homme  (1805),  IX,  Memoire,  Influence  des  Climats.  Comie,  also,  Traitede 
Legislation  (1827),  is  of  opinion  that  "  the  degree  of  civilization  which  a  peo- 
ple may  attain  does  not  depend  on  the  degree  of  development  of  which  they 
are  capable  by  nature,  but  on  that  which  their  geographical  situation  permits 
them  to  attain."  See,  aho,  Herodot.,  Ill,  106;  Hippocr.,  De  -^re  etc.,  71; 
Euripid.,  Medea,  820  fF. ;  Plutarch,  DeExilio,  13.  The  proper  mean  has  been 
found  by  E.  M.  Arndt,  in  his  Anleitung  zu  historischen  Characterschilder- 
ungen  (1810),  and  by  Ritter^  and  his  school.  See,  also,  K.  S.  Zacharice,  Idee 
einer  volkswirthschaftlichen  Geographic  als  Grundlage  der  praktischen  N. 
CEkonomie  fur  jedes  einzelne  Volk:  Vierzig  Biicher  v.  Staate,  II,  79.  See, 
also,  Turgot,  Geographic  politique,  1750,  CEuvres  (ed.  Daire,  II,  611  fl'.); 
Lucder,  Nationalindustrie  und  Staatswirthschaft,  III,  1800  fF. 

*  Maltc  Brun,  Precis,  de  la  Geographic  universelle,  VI.  pr. 

"^  Strabo,  IV,  178.     On  the  climate  of  ancient  Germany,  see  Tacit.^  Germ,  2. 


Sec.  XXXVIII.]  LABOR.  137 

of  the  world,  is  now  covered  with  dried-up  canals,  filled  a 
little  below  the  surface  with  heaps  of  brick  and  broken  vases, 
the  remains  and  other  vestiges  of  a  once  dense  population. 
Its  former  rich  alluvial  soil,  now  almost  calcined,  produces 
at  present  scarcely  anything  except  a  few  saline  plants,  mi- 
mosas etc.^  The  higher  the  civilization  of  a  people,  the  less 
does  it  depend  on  the  nature  of  the  country. 


SECTION    XXXVIII. 

OF  LABOR.  — DIVISIONS  OF  LABOR. 

Man's  capacity  for  most  economic  labor  is  so  closely  con- 
nected with  the  exquisite  articulation  of  the  human  hand,  that 
BulTon  could  say  without  exaggeration  that  reason  and  the 
hand  made  man  man.^  But  it  is  true  of  economic  labor,  as  of 
all  other  labor,  that  it  is  more  efficient  in  proportion  as  mind 
predominates  over  matter. 

The  best  division  of  economic  labor  is  the  following:^ 

A.  Discoveries  and  inventions.* 

B.  Occupation  of  the  spontaneous  gifts  of  nature,  as,  for  in- 

^  Praser,  Travels  in  Koordistan  and  Mesopotamia,  II,  5.  See,  also,  the 
description  of  ancient  Susiana  in  Strabo  XV,  731,  with  that  of  the  new  one 
by  AfKinncir,  Geogr.  Memoir  of  Persia,  92. 

'  Labor  is  not  to  be  confounded  with  activity,  which  is  always  present 
even  in  enjoyment. 

"  Thus,  Galenus,  De  Usu  Partium  Corporis  humani,  L.  I.  The  animal 
nearest  to  man  mentally,  the  elephant,  is  also  possessed  of  a  member  more 
like  the  human  hand  than  any  other  animal.  Its  trunk  was  called  manus  by 
the  Romans.  Hence  the  Indians  call  the  elephant,  the  animal  gifted  with  a 
hand.  Bttffon^s  view  is  exaggerated  by  Helvetius  in  the  interests  of  mate- 
rialism. Aristotle^  (De  partt.  anim.  IV,  10),  opposes  the  saying  of  Anaxagoras : 
OM  TO  yziqa^  h^ziv  ipooviixcbraTOV  zlvru  zcou  ^cocou  dud^ocoKOv. 
Compare  Bell,  On  the  human  Hand,  1836. 

2  As  to  the  imperfection  of  the  ordinary  division  into  agricultural,  indus- 
trial and  commercial  labor,  see  yo/in  Siuc.ri  Mill,  I,  ch.  2,9.  The  division  of 
all  labor  into  mental  and  physical,  is  not  more  satisfactory ;  for  even  the  basest 
labor  is  not  wholly  physical.     See  Buckle,  History  of  Civilization,  vol    II. 

*  Dioscorides  and  Galen  were  acquainted  with,  at  most,  600  plants ;  Limtceus, 


138  PRODUCTION  OF  GOODS.  [B.  I,  Ch.  I. 

Stance,  of  wild  plants,  wild  animals,  and  of  minerals.^  Where 
this  is  the  only  kind  of  economic  labor,  man  is  necessarity  de- 
pendent on  nature  in  a  high  degree. 

C.  The  production  of  raw  materials;  that  is,  a  direction 
given  to  nature  in  order  to  the  production  of  raw  materials, 
by  stock-raising,  agriculture,  forest-culture  etc.,  but  not  by 
mining. 

D.  The  transformation  ( Verarbeitung)  of  raw  material  by 
means  of  manufactories,  factories,  the  trades  etc. 

E.  The  distribution  of  stores  of  goods  among  those  who 
are  to  use  them  directl}^,  whether  from  people  to  people  or 
from  place  to  place  (wholesale),  or  among  the  individuals  of 
the  same  place  (retail).®  To  this  class  also  belong  leasing, 
renting,  loaning,  etc. 

F.  Services,  in  the  more  limited  sense  of  the  term,  which 
embraces  personal  as  well  as  incorporeal  goods ;  as,  for  in- 
stance, the  labors  of  the  doctor,  teacher;  virtuoso,  of  the  states- 
man, judge,  and  of  preachers,  whose  office  it  is,  by  way  of 
eminence,  to  produce  and  preserve  the  immaterial  wealth, 
known  as  the  State  and  the  Church. 

The  order  followed  in  the  above  classification  is  that  in 
which  the  different  classes  of  labor  are  wont  to  be  historically 
developed. 

with  8,000.  About  iSi2^  about  30,000  had  been  described;  in  1S37,  about 
60,000;  in  1849,  about  100,000.     BucMc,  History  of  Civilization  etc.,  II,  p.  359. 

^Industrie  extractives,  according  to  Dunoyer.  When  nature's  spontaneous 
g  ifts  are  exhausted,  this  occupation  readily  becomes  production. 

*  Industrie  voituridre,  according  to  Dunoyer;  industria  traslocatrice  in  oppo- 
sition to  trasforniatrice,  according  to  Scialoja.  Ortes  distinguishes  only  lour 
classes:  agricoltori,  artejici,  dispensntori  and  administratori,  or  raccoglitori, 
manifattori,  and  difensori  di  bene  (E.  N.  I,  2;  III,  14).  A.  Walker,  Science  of 
Wealth  (1S67),  p.  34,  knows  only  three  classes:  transmutation,  transforma- 
tion, transportation. 

'  This  is  not  to  be  understood  in  the  sense,  that  there  ever  was  a  period  in 
■which  these  sciences  were  unknown.  We  need  only  mention  the  position 
occupied  by  the  priest  and  knight  in  the  middle  ages.  But,  looked  upon  as 
economic  labor,  intended  only  for  purposes  of  free  commere,  they  have  become 


Sec.  XXXIX.]  LABOR.  139 

SECTION  XXXIX. 

LABOR.  — TASTE  FOR  LABOR.  — PIECE-WAGES. 

Man's  taste  for  labor  is  conditioned  especially  by  the  extent 
to  which,  and  the  security  with  which,  he  may  hope  to  enjoy 
the  fruit  of  his  labor  himself.  Hence  it  is  that,  as  a  rule,  the 
slave  (§71,  if.)  and  socager  work  least  willingly,  the  day  la- 
borer with  less  industry  than  the  piece-worker,^  who  is  at  the 
same  time  more  satisfied  with  himself,  and  gives  most  satis- 
faction to  his  master,^  since  he  acquires  more  both  for  himself 
and  for  his  master.     The  superiority  of  piece-paid  labor  is 

very  important  onlj  within  a  relatively  recent  period  of  time.  Thus,  for  in- 
stance, there  was  in  Lower  Austria,  in  1866,  one  lawyer  or  notary  to  every 
6,569  inhabitants;  in  Bohemia,  to  every  14,860;  in  Galicia,  to  every  22,361 ; 
in  the  whole  of  Cis-Leithanian  Austria,  12,259.  I^i  1865,  there  was  in  Prussia, 
one  to  every  11,149;  in  Bavaria,  to  every  7,350;  in  Hanover,  to  every  4,946; 
in  1862,  in  Baden,  one  to  every  4,992;  in  1867,  in  Saxony,  one  to  every  3,048. 
Hildebrand' s  Tagebuch,  1868,  I,  234.  There  was  in  Prussia,  in  1871,  one 
doctor  to  every  3,230  inhabitants;  in  Berlin,  to  every  1,100;  in  Heldesheim,  to 
1,803;  in  Cologne,  to  2,120,  in  Marienwerder,  to  7,240;  in  Gumbinnen,  to 
10,047.  Engcl^  Preuss.  Statis.  Zeitschrift,  1S72,  376.  The  verb  "to  plow" 
is,  according  to  comparative  philologists,  of  more  recent  origin  than  "  to 
weave."  (Lassen^  Indische  Alterth.  I,  814  ft")  And  yet  agriculture,  in  the 
sense  above  indicated,  undoubtedly  precedes  industry. 

'  Observed  by  Geiler  v.  Kaiscrsberg.  Compare  Schmoller  in  the  Tiibinger 
Zcitschr.,  i860,  483.  Hour  wages  occupy  a  middle  place  between  day  wages 
and  piece  wages. 

'  Thus  the  introduction  of  piece  wages  into  lower  Silesia  has  increased  the 
daily  earnings  of  workmen  by  one-third,  one-half,  and  even  more.  EngcVs 
Stastist.  Zeitschr.  (1868),  p.  327.  The  investigations  of  the  German  agricul- 
tural congress  on  the  condition  of  agricultural  laborers  in  the  German  em- 
pire (report  of  v.  d.  Goltz,  1S75)  show  that  in  all  Gerrnany  on  an  average, 
the  daily  earnings  of  a  contract  workman  {Accordlohner)  is  to  the  daily  sum- 
mer wages  of  a  day  laborer  as  15:  10  (1420).  On  the  other  hand,  Brassey,  in 
the  construction  of  a  railway,  found  that  the  same  workmen  engaged  in  grad- 
ing, digging,  etc.,  cost  18  pence  per  yard  when  paid  by  the  day,  and  7  pence 
when  paid  by  the  piece.  (Work  and  Wages,  266.)  Swiss  experience  is,  that 
production  became  20  per  cent,  cheaper  under  the  piece  wages  system. 
(Bdhmert,  Beitr.,  109.) 


140  PRODUCTION  OF  GOODS.  [B.  I,  Ch.  I. 

greater  in  proportion  as  the  workman  calculates  his  own  ad- 
vantage. It  is,  therefore,  smallest  in  the  case  of  ingenuous  un- 
educated workmen,  and  in  that  of  the  really  conscientious.^ 
The  fear  of  seeing  one's  condition  grow  worse,  through  want 
of  industry,  exerts  an  influence  precisely  similar  to  the  hope  of 
improving  it.  In  both  respects,  free  competition  (§97)  must 
be  considered  one  of  the  principal  means  of  furthering  the 
taste  for  labor.* 

Among  the  causes  which  have  contributed  to  make  Eng- 
land the  first  country  in  the  world,  viewed  from  a  politico- 
economical  stand-point,  English  writers  on  Political  Economy 
have  pointed  out  as  one  of  the  principal,  the  prevalence  there 
of  piece-wages.^     Payment  by  the  piece  should,  of  course,  be 

2  According  to  v.  d.  Goltz's  EnquSte,  the  earnings  of  workmen  by  the  piece, 
compared  with  the  wages  paid  workmen  by  the  day  in  summer,  is  especially 
high  in  middle  Franconia  (16.5:10);  in  the  Leipzig  circle  of  the  German 
empire  (16.6),  in  the  Braunschweig  plain  (16.8),  within  the  jurisdiction  of 
Hildesheim  (18.1),  of  the  Bavarian  Palatinate  (18.6),  in  Rhenish  Hesse  (23.2), 
especially  low  in  Stettin  (13.2:10),  in  Stralsund  (12.4),  in  Schleswig  Holstein 
(12),  in  Osnabriick,  (11.7.) 

■*  According  to  v.  Flotovj^  Anleitung  zur  Fertigung  der  Ertragsanschlage, 
I,  80,  four  days  of  serf  labor  are  equivalent  to  only  three  of  a  free  day  laborer. 
According  to  v.  Jacob,  Ueber  die  Arbeit  Leibeigener  und  freier  Bauern  (1815), 
21,  two  day  laborers  are  equal  to  three  serfs,  and  one  farm  horse  is  equal  to 
two  employed  by  serfs.  It  is  as  impossible  to  obtain  accurate  general  esti- 
mates here,  as  in  the  case  of  slave  labor.  As  a  rule,  hope  is  not  only  a  more 
humane  but  a  sharper  spur  to  action.  But  if  force  is  employed  at  all,  there  is 
no  doubt  that  the  greater  it  is,  the  more  effectual  it  is.  Wherever  the  right  of 
corporal  punishment  has  been  taken  from  the  masters,  the  technic  value  of 
serfdom  has  uniformly  decreased.  In  the  English  West  Indies,  formerly, 
philanthropic  masters  who  treated  their  negroes  with  unwonted  gentleness, 
obtained  from  them,  as  a  rule,  very  poor  economic  results.  While  each  of 
the  slaves  expressed  the  greatest  indignation  at  the  idleness  of  the  others 
when  they  had  "  so  good  a  master,"  they  were  all  equally  and  excessively 
lazy.  The  weekly  production  of  a  plantation  sank  rapidly  under  this  system 
from  thirty-three  hogsheads  to  twenty-three,  and  finally  to  thirteen.  Math. 
Levis,  Journal  of  a  West  India  Proprietor,  1834;  Edinburg  Review,  XLV, 
410.  For  the  same  reason,  the  negroes  in  the  Spanish  colonies,  who  were 
treated  much  more  gently  than  those  owned  by  other  European  nationalities 
produced  much  worse  work.     See,  however.  Columella,  De  Re  rust.,  I,  S. 

5  According  to  Hovjlctt,  The  Insufficiency  of  the  Causes  to  which  the  In- 


Sec.  XXXIX.]  LABOR.  14-1 

practiced,  only  in  cases  in  which  the  work  may  be  broken  up 
into  a  series  of  isolated  tasks,  and  is  completed  by  such  a  se- 
ries. Hence,  it  is  not  applicable  where  a  great  many  differ- 
ent things  are  required  of  the  same  workman;  nor  in  rela- 
tions in  which  continuity,  as,  for  instance,  of  the  inclination 
or  disposition  of  the  workman  is  the  chief  thing.^  The  fur- 
ther the  division  of  labor  is  carried  in  our  day,  the  greater 
the  part  money  plays  in  our  social  economy,  and  the  more 
lasting  relations  are  dissolved,  the  more  general  becomes  piece- 
work, which,  with  all  its  material  advantages,  has,  speaking 
morally,  its  dark  side.    {Atomism  /^   In  a  great  many  branches 

crease  of  our  Poor  Rate  have  been  ascribed  (17SS),  piece  wages  had  become 
usual  "  a  few  years  ago."  Very  recently  the  trades  unions  have  again  re- 
stricted the  system  of  piece  wages  (§  176). 

*  This  system  is  inapplicable  in  the  case  of  domestic  servants  {Gcsinde)  who 
are  a  part  of  the  household,  and  who  afford  to  their  masters,  besides  their  ser- 
vices, the  advantage  of  having  a  person  at  their  disposal  always  about  them, 
and  whose  wages  are  therefore  in  great  part  their  board  and  lodging.  Still 
less  can  it  apply  to  the  case  of  the  family  physician,  whose  services  consist 
not  simply  in  writing  prescriptions,  but  who  is  also  the  professional  family 
friend.  The  same  may  be  said  of  the  state  official,  clergyman  etc.,  from 
■whom  it  is  demanded  that  he  should  sacrifice  his  entire  life  to  the  service  of 
the  public.  Against  adopting  piece  wages  in  the  case  of  state  officials,  it  may 
be  further  urged  that  no  case  at  law,  no  act  of  public  life  is  precisely  similar 
to  any  other.  It  cannot  be  applied  to  that  of  soldiers,  because  they  are  called 
upon  for  action  only  after  a  longtermof  peace,  during  all  of  which  they  must 
keep  themselves  in  readiness  for  war.  (Schdffle,  N.  CEk.,  II,  3SS.)  It  has 
also  been  the  practice  of  courts,  until  recently,  on  account  of  their  dignity,  to 
pay  their  mechanics  not  by  the  piece,  wherever  that  was  practicable,  but  by 
a  fixed  salary.  An  able  professor  in  a  university  is  of  use  to  it  not  only  by 
his  lectures,  but  by  his  reputation  and  example  etc. ;  hence,  here,  a  cornbina- 
tion  of  piece  wages  and  of  a  regular  salary  is  preferred.  As  to  services,  the 
permanency  of  which  constitutes  their  essential  character,  remuneration  is 
also  wont  to  be  permanent  or  hereditary,  as  in  the  case  of  very  many  public 
officers,  while  civilization  is  as  yet  unadvanced.  Later,  in  proportion  as  the 
progress  of  civilization  makes  itself  felt,  this  hereditariness  is  wont  to  be 
confined  to  the  sovereign.  For  an  opposite  view,  see  BoxJiorn,  Institutt.  po- 
litt.  (1663),  41. 

■"  Thus,  the  Chinese,  who,  by  a  ridiculous  exaggeration  bordering  on  carica- 
ture of  many  of  our  recent  tendencies,  may  aftbrd  us  a  warning  reflection  of 
ourselves  in  our  present  state  of  civilization,  rarely  labor  efficiently  when  not 


142  PRODUCTION  OF  GOODS.  [B.  I,  Ch.  1, 

of  manufactures  it  has  been  relinquished  because  the  excellence 
of  his  work  suffered  from  the  workman's  haste,  and  because 
he  could  not  be  properly  controlled.^  It  is  rather  the  quan- 
tity than  the  quality  of  work  which  increases  with  piece- 
work, and  where  the  quality  of  the  work  is  what  is  desired, 
this  system  has  not  the  same  field.  And  where  it  obtains,  as, 
for  instance,  in  the  case  of  ordinary  type-setters,  resort  is  had 
to  payment  by  the  day  for  compositors  engaged  on  mathemat- 
ical treatises,  fac-similes,  inscriptions  etc.  On  the  side  of  the 
workman,  it  is  generally  only  the  idle  and  awkward  who  op-« 
pose  piece-work  on  principle.  It  is  a  subject  of  regret  that 
the  best  and  most  industrious  workmen  are  carried  away  b}'' 
it  to  an  extent  detrimental  to  their  health.^     However,  many 

watched.  Only  by  means  of  piece  wages  or  the  share-system  can  they  be 
induced  to  do  good  work.  R.  M.  Micking,  Recollections  of  Manilla  and  the 
Phillippine  Islands,  1851. 

,  *  Day  laborers,  for  instance,  must  be  watched  over  during  the  harvest,  to 
prevent  their  idling  away  their  time,  and  piece-workers  to  prevent  their  con- 
tinuing to  work  in  spite  of  wet  weathei",  binding  sheaves,  for  instance,  which 
causes  the  sheaves  to  rot.  In  England,  it  is  considered  almost  an  impossibil- 
ity to  induce  laborers  to  cut  wheat  close  enough  to  the  soil.  {Sinclair, 
Code  of  Agriculture,  102.)  The  haste  of  piece-workers,  in  the  harvest  of  the 
rape,  occasions  great  loss,  by  the  fall  of  the  seed.  In  Russia  the  removing 
of  the  hide  from  animals  is  paid  for  by  the  piece,  and  the  laborers  injure  a 
very  large  number  of  skins  in  their  haste.  Sieinhaus,  Russlands  industrielle 
und  commercielle  Verhaltnisse,  425.  Piece-wage-s  are  to  be  entirely  dis- 
countenanced in  the  reeling  of  silk.  See  ^er;/c>?^z7/?',  Technologie,  II,  215.  A 
yearly  salary  is  to  be  recommended  in  the  tending  of  cattle,  because  here  a 
certain  connection  {Anschluss)  with  individuals  is  desirable.  In  building 
trades,  contractors  in  England  prefer  a  regular  salary ;  but  they  employ  model 
workmen,  the  so-called  "  bell  horses,"  to  whom  they  pay  a  large  salary,  and 
who  keep  the  others  on  the  sh'ain  by  their  example,  and  who  on  that  account 
are  very  much  hated  by  their  colleagues. 

*  Adam  Stnith,  W.  of  Nations,  I,  ch.  8.  HoTvlett,  also,  1.  c,  thinks  that 
piece-wages  increase  the  earnings  of  workmen,  but  at  the  expense  of  their 
capacity  for  constant  labor.  Count  Gortz^  in  his  Reise,  328,  relates  with  what 
fatal  effect  piece-work  in  Demarara  tells  on  white  laborers  and  their  horses. 
After  the  February  Revolution,  Parisian  workmen  demanded  the  abolition 
of  piece- wages,  and  obtained  it  in  several  manufactories.  Revue  des  deux 
Mondes,  March  15,  1S4S. 


Sec.  XXXIX.]  LABOR.  143 

of  the  deficiencies  of  the  piece-wage  principle  may  be  removed 
by  agreements  made  with  whole  groups  of  workmen;  pro- 
vided, always,  that  the  groups  are  not  too  large  to  prevent 
the  mutual  knowledge  and  surveillance  of  their  members.^" 
The  quantity  of  work  is  greatest,  its  quality  best,  and  the  mate- 
rial" employed  used  most  sparingly,  when  the  workman  works 
on  his  own  account,  or  has  a  share  in  the  profits.  This  last  is 
proper  only  in  those  branches  of  the  business  the  success  of 
which  depends  on  the  quality  of  the  work.  To  compel  the 
workman  to  share  in  the  profits  alone  will  not  do,  because  he 
is  generally  too  poor  to  run  any  risk  or  to  do  long  without  his 
earnings.  The  system  of  paying  "  commissions,"  therefore,  is 
to  be  recommended  all  the  more  strongly,  since  it  is  a  combi- 
nation of  fixed  wages  with  a  share  in  the  profits.  This  sys- 
tem is  very  prevalent  in  North  America,  where  a  great  deal 
has  to  be  confided  to  the  workmen.  It  is  practiced,  also,  in 
the  whale  fisheries,  and  on  the  Greek  ships  in  the  Levant  en- 
gaged in  coasting,  where  much  more  depends  on  the  care  of- 
the  sailors  than  on  the  ability  of  the  captain.^^    It  presupposes 

'"  In  several  Swiss  factories,  understrappers  receive  a  salary,  while  viontettrs 
work  by  groupe-contract.  (Bohmert,  Arbeiterveraltnisse  und  Fabrikeinricht- 
ungen  der  Schw.,  II,  70.)  Sub-contracting,  where  the  contract  is  generally 
made  with  only  one  person,  for  the  most  part  of  more  than  average  capacity, 
and  this  latter  contracts  with  other  workmen  on  his  own  account  entirely,  is 
considered  by  philanthropic  employers  of  labor  as  one  of  the  worst  kinds  of 
remuneration.  The  more  democratic  system  of  gang-contract  is  much 
better,  although  even  here,  it  is  very  easy  for  the  weaker  members  of  a 
good   gang  to  overwork  themselves.      (Edinburg   Review,  October,  1873, 

365-) 

'^  Especially  important  in  chemical  factories.  The  expense  of  greasing  on 
the  Rhenish  railways  fell,  through  premiums  offered  as  rewards  for  saving, 
from  27,000  thalers  to  S,ooo,  in  spite  of  an  increase  in  the  amount  of  traffic. 
(v.  Mangoldt^  Volkswirthschaftslehre,  349.)  This  was,  besides,  the  most  ef- 
fectual way  of  controlling  the  theft  of  material. 

'^  In  the  cachelot  fishery,  the  captain  receives  one-sixteenth,  the  master, 
one  twenty-fifth,  the  second  master,  one  thirty-fifth,  the  boatswain,  one- 
sixtieth,  each  sailor,  one  eighty-fifth  of  the  profit.  (Humboldt,  N.  Espagne, 
IV,  10.)  This  system  is  very  common  in  North  America.  See  Carey 
in  J,  S.  MilVs  Principles,  V,  ch.  9,  7.      In  heathen   Iceland,  mariners  were 


144  PRODUCTION  OF  GOODS.  [B.  I,  Ch.  I. 

good  workmen,  equal  almost  to  their  master  in  education,^^ 
for  instance,  in  the  case  of  overseers  of  labor ;  since  every  bet- 
ter inducement  to  the  taste  for  labor  which  is  not  only  juster 
but  more  complicative,  is  not  only  a  condition  but  also  the  ef- 
fect of  higher  culture.  But  if  the  economy  of  a  people  is  ripe 
for  share-wages,  and  masters  begin  to  introduce  them  in  earn- 
est in  individual  cases,  the  work  produced  will  be  improved  to 
such  a  degree  that  it  can  not  be  long  before  all  others  will  be 
necessitated  to  follow  them." 

If,  howerer,  workmen  are  to  enjoy  the  fruit  of  their  indus- 
try, it  is  necessary,  first  of  all,  that  public  order  should  be  se- 
cure. Even  the  most  industrious  become  discouraged  where 
despotism  or  anarchy  prevails.  On  the  other  hand,  even  the 
greatest  security  is  no  sufficient  incentive  to  a  nation  of  fa- 
talists." 


always  paid  a  certain  quota  of  the  profits.  Leo,  in  Raumer's  historischem 
Taschenbuch,  1835,  524.  The  same  was  often  the  case  in  China.  McCullocJi, 
Comni.  Diction,  v.  Canton.  In  England,  its  employment  was  rendered  very 
difficult  by  the  laws  of  partnership,  which  made  each  individual,  except  in 
great  chartered  societies,  responsible  for  all  kinds  of  debts  contracted  by  the 
rest  of  the  firm.     J.  S.  Mill,  B.  IV,  ch.  7,  5. 

'3  The  house  painter  Leclaire,.in  Paris,  obtained  very  high  results  in  this 
respect.  Leclaire,  Repartition  des  Benefices  du  Travail,  1842.  He  retained 
for  his  own  services  as  contractor  the  sum  of  6,000  francs,  and  paid  each 
workman  the  salary  he  had  hitherto  received.  What  remained  was,  at  the 
end  of  the  year,  equally  divided  among  all.  Leclatre  assures  us  that  he 
was  always  satisfied  with  the  system.  The  paying  of  a  proportion  of  the 
general  pi-ofits  to  laborers  is  advisable  only  in  case  their  ability  of  sur- 
veying the  whole  is  not  much  inferior  to  that  of  their  employers.  Where 
a  special  proportion  is  paid,  in  special  branches  of  business,  it  is  sufficient 
if  their  supervision  extends  over  that  particular  branch.  But  a  sharing  in 
the  profits  of  business  always  supposes  a  corresponding  supervision  of  the 
business  itself,  and  also  the  keeping  of  accounts. 

'*  A  very  good  remedy  against  indigence  among  the  lower  classes.  (Umf- 
fcnhach.  National  CEkonomie,  1867,214.)  But  whether  it  will  ever  be  possi- 
ble to  make  the  remuneration  of  the  navvy  or  that  of  a  type-setter  depend 
on  the  final  success  of  his  work,  qticere. 

'5  Toiirnefort,  speaking  of  the  fatalism  of  the  Turks,  says  that  they  always 
and  everywhere  leave  the  world  as  they  found  it.  According  to  their  own 
proverb,  no  grass  grows  again  where  the  Osman  has  set  foot. 


Sec.  XL.]  LABOR.  145 

SECTION  XL. 

LABOR.  — LABOR-POWER  OF  INDIVIDUALS. 

The  average  labor-power  of  individuals  varies  very  much 
in  different  nations.^  The  reason  of  this  is,  in  part,  doubtless 
a  difference  in  natural  endowments.  Thus,  for  instance,  no 
people  surpass  the  English  and  Anglo-American  in  energy, 
none  the  German  in  intelligence  in  work  or  the  French  in  taste. 
Where  we  can  assume  that  the  same  meaning  is  attached  to  the 
expression,  "  military  capacity,"  by  the  different  recruiting  bu- 
reaus, important  conclusions  as  to  the  physical  labor-power  of 
different  localities  may  be  di^awn  from  the  ratio  existing  be- 

'  The  experiments  made  with  the  dynamometer  in  iSoofF.  show  that  the  av- 
erage _/brce  maniieUc  of  an  inhabitant  of  Van  Dieman's  Land  is  to  that  of  an 
inhabitant  of  New  Holland,  of  Timor,  of  a  French  marine,  and  of  an  English 
colonist  in  Australia,  in  the  ratio  of  50,  51,  58,  69,  71  kilogrammes.  Peron, 
Voyage  de  Decouverte  aux  Terres  australes,  2d  ed.,  II,  417.  It  was  found 
more  recently  in  the  American  army,  that  the  average  lifting-power  of  white 
soldiers  was  314  to  343  lbs;  of  white  marines,  307;  students,  30S;  ne- 
groes, 323;  mulattos,  348;  and  Indians,  419.  Gould,  Investigations  in  the 
Military  and  Anthropolog.  Statistics  of  American  Soldiers,  1S69, 458,  scq.  Ac- 
cording to  English  manufacturers,  an  English  laborer  accomplishes  almost  as 
much  again  as  a  French  one(  .^),  and  the  latter  in  turn  more  than  an  Irishman. 
An  English  contractor,  who  had  worked  in  French  manufactories,  expressed 
his  opinion  concerning  the  French  to  this  effect :  "  It  cannot  be  called  work 
they  do;  it  is  only  looking  at  it  and  wishing  it  done."  Senior,  Outlines,  149. 
Thus,  for  instance,  a  good  English  spinner  with  a  machine  of  800  spindles 
could  produce  66  lt)S.  of  yarn.  No.  40,  while  a  Frenchman  could  produce  only 
48  lbs.  {M.  Mold,  Reise  durch  Frankreich,  535;  compare  Dingier,  Polyt. 
Journal,  I,  63  seq.)  That  the  Americans  also  are  inferior  to  the  English  in 
strength  and  dexterity  is  attested  by  the  American  Hevjitt.  See  Brcntano, 
Arbeitergilden,  II,  231.  A  Berlin  wood-sawyer  accomplished  as  much  in 
ten  days  as  a  West  Prussian  from  Labiau  in  twenty-seven  days.  J.  G.  Hoff"- 
mann.  English  farmers  on  the  Hellespont  prefer  to  pay  Greek  laborers  £10 
prer  year  "besides  their  keep,"  rather  than  £3  to  Turkish  laborers.  {Lord 
Carlisle,  Diary  in  Turkish  and  Greek  Waters,  1S54,  P-  77  ^eq.)  In  Paulo- 
pinang,  the  Malayan  agricultural  laborer  receives  $2j!^  per  month,  the 
Malabar,  $4,  the  Chinese,  $6 ;  for  which  compensation  they  work  respect- 
ively 26,  28  and  30  days.  Riitcr,  Erdkunde,  \,  54. 
Vol,  I. — 10 


146  PRODUCTION  OF  GOODS.  [B.  I,  Ch  I 

tween  the  number  of  those  fit  for  military  service  and  those 
who  are  legally  liable  to  military  duty.^ 

But  these  conclusions  are  greatly  modified  by  the  state  of 
civilization  and  that  of  society.  Where  the  laboring  classes 
are  despised  and  paid  in  a  manner  unworthy  of  human  beings, 
the  badness  of  their  work  will  be  in  keeping  with  the  esti- 
mation in  which  it  is  held.  The  reverse  of  this,  also,  is  usually 
true  under  different  circumstances.  (§  173.)  Thus,  it  has  been 
noticed  in  France,  that  native  workmen,  provided  with  as  sub- 
stantial food  as  English  workmen,  are  scarcelv  inferior  to  the 
the  latter  in  the  technic  value  of  their  labor .^  A  Mecklen- 
burg day  laborer  eats  almost  twice  as  much  as  a  Thuringian 
workman,  but  then  he  accomplishes  almost  twice  as  much. 
Hence,  employers  gain  in  the  long  run  by  paying  their  workmen 
well.  As  civilization  advances,  the  same  number  of  workmen 
become,  not  only  more  industrious  and  more  capable,  but  the 
same  quantity  and  quality  of  labor  becomes,  as  a  rule,  cheaper.* 

*  Little  light  can  be  thrown  on  this  subject  by  a  comparison  of  different 
countries.  Thus,  in  France,  there  are  614  persons  in  every  i,ooo  examined 
fit  for  military  service;  in  Bavaria,  705;  in  Denmark,  523;  in  Austria,  49S; 
in  Prussia,  284;  in  Saxony,  259;  in  England,  where  the  conscription  is  from 
among  the  lowest  classes,  665 ;  and  in  Wiirttemberg,  490.  (  Wappaus,  Allg. 
BevOlkerungsstatistik,  II,  71,  140.  Massy,  Remarks  on  the  Examination  of 
Recruits,  1S54.  [Memminger,  Wiirt.  Jahrb.,  1S43,  103.)  The  comparison  of 
different  parts  of  the  same  state  is  much  more  instructive.  Thus,  in  Saxony, 
cities  afford  only  197,  and  the  flat  country  only  265  per  1,000  (Sachs,  statist. 
Ztschr.,  1856,  No.  4  ff.);  and  in  France  there  are  among  those  of  illegitimate 
birth  a  very  large  number  unfit  for  military  service.  (Journ.des  Econ.,  1850, 
XXV,  69.)  According  to  the  Austrian  Annual  of  military  statistics,  there 
Avere  in  1870,  on  an  average,  throughout  the  entire  monarchy,  211  per  1,000 
of  those  liable  to  enter  the  ranks  of  the  military,  fit  for  service;  in  the  Inns- 
bruck command,  325;  in  Lemberg,  179. 

^M.  Chevalier ,  Cours,  I,  115.  Adam  Smithy  B.  I,  ch.  8,  noticed  the  great  in- 
dustry of  well  paid  workmen.  Among  the  imcducated,  labor  must  almost 
necessarily  be  repulsive  in  proportion  as  it  is  illy  remunerated. 

^Thusvl.  Young  remarked  that  wages  in  Ireland  are  wretchedly  low,  while 
labor  is  far  from  being  cheap.  In  his  "  Evidence  in  Respect  to  the  Occupa- 
tion of  Land  in  Ireland,"  II,  135,  he  says  that  a  Scotch  day  laborer  at  is.  per 
day  is  cheaper  tlian  an  Irish  day  laborer  at  |^s.  According  to  McCulloch, 
"Statis.  Account  of  the  British  Empire,"  I,  666,  industrial  labor  in  Germany 


Sec.  XL.]  LABOR. 


147 


The  moral  culture  of  a  people  exerts  the  greatest  influence 
here.  In  every  private  undertaking,  a  great  part  of  the  ex- 
pense attending  it,  and  in  every  state,  a  great  part  of  the  ex- 
pense of  its  police  system,  and  of  its  system  of  administering 
justice,  is  occasioned  only  b}'  the  dishonesty  of  men.  If  all 
this  expense  could  be  dispensed  with,  and  full  confidence  placed 
in  individuals,  it  would  be  possible  to  devote  much  more  time 
and  energy  to  positively  useful  labor.^  In  estimating  the  labor- 
power  of  ditTerent  nations  or  different  periods  of  time,  the  di- 
vision of  population  according  to  age  is  also  of  importance. 
As  a  rule,  the  labor-power  of  males  is  greatest  from  the  age 
of  twenty-five  to  the  age  of  forty-five.  The  more  numerous, 
therefore,  the  class  of  the  population  between  these  ages  is, 
the  more  favorabl}^  other  things  being  equal,  is  it  situated  as 
regards  labor."  "^  But,  as  a  rule,  the  relative  number  of  full- 
grown  people  is  greatest  in  highly  civilized  nations.  (§  248.)^ 

and  France  is  dearer  than  in  England,  because  in  the  former  countries  there 
are,  ceteris  paribus,  twice  as  many  laborers  employed  in  most  manufactures. 
See  Senior,  Lectures  on  Wages,  1S30,  11,  and  the  reports  of  the  committees 
of  parliament, /rt5«/«  on  French  manufactures  (1825).  The  same  has  been 
experienced  in  the  agricultural  history  of  Schleswig-Holstein.  Sej  Haiiss- 
en,  Archiv.  der  Politisch.  CEk.  IV,  421.  /,«  main  d'tvuvre  est  clih'c  en  Russic 
des  qiCil  s'agit  d'line  ccrtainc  capacite  et  d'lm  certain  dcgrd  d^instruciion  pro- 
fessionellc,  tandis  que  ccllc  de  Vouvricr  ordinaire  n'est  mdle  part  aussi  bas, 
(Tdgoborsky.) 

*  Thus  even  Columella,  R.  R.  I,  9.     y.  S.  Mill,  Principles,  I,  ch.  7,  5. 

8  Thus,  for  instance,  the  Lex  Visigoth.,  VIII,  4, 16,  graduates  the  fine  to  be 
paid  by  the  murderer  according  to  the  age  of  his  victim.  It  increases  up  to  the 
20th  year  in  the  case  of  males,  and  diminishes  after  the  50th.  In  the  case 
of  females,  the  maximuin  is  attained  between  the  ages  of  15  and  40.  Simi- 
larly even  Afoscs,  Book  III,  27. 

'  As  to  what  concerns  the  two  sexes,  thejbrce  rdnale  of  adult  males  is  twice 
that  of  females  in  the  human  species.  The  difference  between  them  in  youth 
is  not  so  great.  The  force  mantiellc  of  the  two  sexes  at  the  age  of  30  is  as 
9:5.  (^udtelct,  Sur  ITIomme  II,  p.  73  ff.)  The  numerical  ratio  of  one  sex  to 
the  other  varies  but  little  among  those  nations  which  have  attained  a  certain 
degree  of  civilization.     See  infra,  §  245. 

8  It  is  of  great  importance  to  calculate  here  the  number  of  days  in  the  year 
in  which  the  laborer  is  compelled  to  be  idle  on  account  of  sickness.     Fengcr, 


148  PRODUCTION  OF  GOODS.  [B.  I,  Ch.  1. 

SECTION  XLI. 

LABOR.  — EFFECT  OF  THE  ESTEEM  IN  WHICH  IT  IS  HELD. 

As  civilization  advances,  labor  becomes  more  honorable. 
All  barbarous  nations  despise  it  as  slavish.  Pigrum  et  iners 
videtur  stidore  adqidrcre  quod  Rossis  sanguine  -par'are :  has  been 
the  motto  of  all  medieval  times.  In  heathen  Iceland,  the 
owner  of  a  piece  of  land  might  be  deprived  of  it  by  an  adver- 
sary who  could  overpower  him  in  single  combat.  This  mode 
of  acquisition  was  considered  more  honorable  than  purchase. 
It  was  Thor's  own  form  of  investiture.  The  ideas  of  the 
Romans  on  rightful  acquisition  may  be  inferred  from  the  word 
mancipmm  (manu  capere).^  Pure  Christianity,  on  the  other 
hand,  preached  the  honorableness  of  labor  from  the  first 
(Thess.  4,  ii;  II.  Thess.  3,  8  seq. ;  Eph.  4,  28).  And  so  in 
the  time  of  the  Reformation,^  when  Christendom  was  return- 
ing to  its  primitive  purity. 

In  keeping  with  this  is  the  fact,  that  the  most  cultivated 

(Quid  faciant  astas  annique  tempus  ad  frequentiam  et  diuturnitatem  morbo- 
rum,  Hafnise  1S40),  finds  the  following  result: 

Between  15  and  19  years,     7.2  days.     Between  35  and  39  years,     7.8  days. 
"         20  and  24  years,  10.3  days.  "         40  and  44  years,     8.3  days. 

"        25  and  29  years,     9.5  days.  "        45  and  49  years,  11. 6  days. 

"        30  and  34  years,     7.6  days.  "        50  and  59  years,  14. i  days. 

According  to  Villerme,  in  the  Annales  d'Hygiene,  II, 

At  60  years 16  days.  At  67  years 42  days. 

At  65  years 31  days.  At  70  years 75  days. 

The  latter  table  is  the  result  of  a  comparison  made  of  the  tables  of  seventy 
Scotch  mutual  aid  societies.     Compare  Divgler^  Polyt.  Journal,  XXIV,  16S. 

'  Tacii.,  Germ.,  14.  Leo,  in  Rau»ier''s  Taschenbuch,  1S35,  41S.  Maxime 
sua  esse  credebanf,  qncc  ex  hostibus  cepissent.  (Gajiis  IV,  16.)  Roman  auction 
sub  hasta!  Similar  views  obtained  among  the  Thracians.  See  Herodot.,  V,  6. 
In  Sparta,  even  in  the  time  of  Agesilaus,  economic  labor  was  considered  un- 
worthy of  a  free  man,  (Plutarch,  Ages,  26) ;  while  the  Athenians,  from  the 
time  of  Solon,  punished  idleness,  and  from  that  of  Pericles  "  knew  no  other 
festival  but  attending  to  their  business."  Thucyd.,  I.  70.  For  some  happy 
observations  on  this  subject,  see  Rielil,  Die  deutsche  Arbeit,  1S61. 

2  Compare  Erasmus  CoUoq.  (ed.  Stallb),  21  ff.,  213  ff.,  392  fF. 


Sec.  XLI.]  LABOR.  149 

nations,  and  the  same  may  be  said  of  individuals,  value  time 
most  highly.  "  Time  is  monc}'."  {Boijaiiiin  FranMin^  An 
English  proverb  calls  time  the  stulT  ot*  which  life  is  made." 
While  in  negro  nations,  individuals  do  not  even  know  their 
own  age;  while  in  Russia,  there  are  very  few  clocks  to 
strike  the  hours,  even  in  the  towers  of  churches,  in  England, 
a  watch  is  considered  an  indispensable  article  oi  apparel,  even 
for  very  young  people  and  for  some  of  the  lower  orders  of 
society.*  Railroads  operate  in  this  respect  as  a  kind  of  na- 
tional clock.  The  introduction  of  machinery  and  the  more 
minute  division  of  labor,  make  punctuality  a  necessity.  While 
South  Americans  and  West  Indians  are  frightfully  careless  in 
their  every  movement,  a  carelessness  ^vhich  betrays  itself  even 
in  their  drawling  speech ,  ^  the  life  of  a  New  Englander  has 
been  compared  to  the  rush  of  a  locomotive.  In  the  markets 
of  Central  Asia,  nothing  strikes  the  European  with  so  much 
surprise  as  the  little  value  put  upon  time  by  the  merchants  of 
India  and  Bucharia,  who  are  fully  satisfied  when,  after  endless 
waiting,  they  succeed  in  obtaining  a  somewhat  higher  price 
for  their  wares.^ 

'  Temple  learned  from  the  Dutch  of  his  own  age  that  the  time  of  industri- 
ous men  is  the  greatest  home  commodity  of  a  country.  (Works  1, 129.)  "A 
trader's  time  is  his  bread."  (Sir  M.  Decker,  Essay  on  the  DecHne  etc.,  1744, 
24.)  JValpoIc,  in  his  Testament  poHtique  II,  3S5,  speaks  of  the  inferiority  of 
the  Roman  Church  in  this  respect.  I  Avould  allude  to  the  medieaval  prohi- 
bition "  to  sell  time  "  as  one  of  the  chief  grounds  of  the  prohibition  of  usury. 
(See  RoscJier^  Gesch.  der  N.  CEk.  in  Deutschland,  7.)  Economia  di  temfo  eqiii- 
vale  a  prolimgamcnto  di  csistenza.     (Scialoja.) 

*  DouvillCy  Voyage  au  Congo  I,  239.  See  v.  Haxthausen,  Studien,  II,  439; 
W.  yacob,  Production  and  Consumption  of  the  precious  Metals,  II,  209. 
The  division  of  the  day  into  hours  dates  from  the  time  of  the  sun  dials  of 
Alexandria.  It  was  not  known  in  Rome  until  after  the  year  of  the  city  491. 
(Mominsen,  Romische  Geschichte,  I.  301.) 

^  Pinckard,  Notes  on  the  West  Indies,  1S06,  II,  107.  In  Spain  it  looks  as 
if  no  one  in  the  streets  was  in  a  hurry.  W'hat  a  contrast  between  the  sans 
souci  gait  of  persons  at  bathing  places  and  the  resorts  of  pilgrims  and  the 
precipitate  haste  in  commercial  centres! 

^ Mejendoi^',yoyage  d  Boukhara,  246. 


150  PRODUCTION  OF  GOODS,  [B.I,  Ch.  I. 


SECTION  XLIL 

OF    CAPITAL.  — THE    CLASSES    OF    GOODS    OF    WHICH    A 
NATION'S  CAPITAL  IS  MADE  UP. 

Capital  ^  we  call  every  product  laid  by  for  purposes  of  further 
production.     (§  220).^ 

'  The  history  of  this  idea  aftbrds  a  remarkable  example  of  the  confusion 
produced  by  the  employment  of  scientific  terminology  in  daily  life.  Until 
within  a  short  time  every  possible  meanmg  of  the  word  capital  was  to  be 
found  in  the  dictionary  of  the  French  Academy,  its  scientific  politico-eco- 
nomical meaning  alone  excepted.  During  the  middle  ages,  the  Latin  capitale 
was  used  to  signify  both  loaned  money  and  cattle.  (Diicaiigc^  s.  v.)  When 
culture  was  at  its  highest  in  Greece,  Demosthenes  entertained  very  good 
ideas  of  the  nature  of  capital  which  he  sometimes  calls  aifopuin.  sometimes 
epauo^,  the  meaning  of  which  he  extends  also  to  the  incorporeal  capital  of 
a  good  reputation.  (Adv.  Mid.,  574;  pro  Phorm,  947.)  The  same  may  be 
said  of  the  Roman  in  conception  o{  feciiUuin.  See  Hildcbrand's  Jahrbb., 
1866,  I.  338.  On  the  beginnings  of  the  present  idea  of  capital  among  the 
later  schoolmen,  see  Funck,  Tiibinger  Ztschr.,  1869,  149.  The  diary  of 
Lucas  Re)>2s,  1491-1541  (ed.  Greiff,  1S61),  calls  commercial  capital,  in  most 
instances,  the  chief  good  {Hauptgut)  p.  37;  also  Cavedal.  The  words 
money  and  capital,  interest  and  the  price  of  money  are  now  confounded  in 
daily  life,  as  they  were  formerly  by  most  writers.  In  the  17th  century.  Child 
and  Loche  may  be  mentioned  as  instances.  Hobbes  had  some  faint  notion  of 
the  productive  power  of  capital.  See  Roscher,  Zur  Geschichte  der  englischen 
Volkswirthschaftslehre,  49,  60,  102.  Thus,  also,  in  the  iSth  century,  La^v, 
Sur  rUsage  des  Monnaies,  697;  Trade  and  money  (1705)  117;  Mdlon,  Essai 
politique  sur  le  Commerce,  1734,  ch.  22;  (?«//'««/,  Delia  Moneta,  IV,  i,  3; 
Blachstone^  Commentaries,  1764,  II,  456;  Gcnctvesi,  Economia  civile,  II,  2,  18, 
13;  Sietvari,  Principles,  IV,  i,  ch.  IV;  Verri,  Meditazioni,  XIV;  BUsch, 
Geldumlauf,  V.  14;  A.  Toung^  Political  Arithmetics  (1774),  i,  ch.  7.  Hume, 
on  the  other  hand,  Discourses  (1752),  No.  4  (on  interest),  shows,  that  the  rate 
of  interest  is  dependent,  not  as  Loche  supposed,  on  the  abundance  or  scarcity 
of  money,  but  on  the  state  of  profit  and  on  the  relation  between  the  demand 
and  supply  of  capital.  Similarly,  J.  Massie,  An  Essay  on  the  governing 
Causes  of  the  Rate  of  Interest  (1750J.  ^uestiay,  Dialogue  sur  le  Commerce, 
173  (ed.  Daire),  shows  that  he  had  a  very  clear  conception  of  the  operation, 
and  of  the  principal  component  parts  of  capital.  Turgot,  Sur  la  Formation 
et  la  Distribution  des  Richesses,  §  14,  54-79,  came  very  near  the  truth,  and  yet 
missed  it.  He  recognized  the  necessity  of  advances  which,  as  a  rule,  are  the 
result  of  saving,  in  every  case  of  production.  He  also  distinguishes  in  the 
product  of  the  soil,  besides  the  produit  net  and  the  subsistance  du  labourcur. 


Sec.  XLII.]  CAPITAL.  151 

Hence,  the  capital  of  a  nation  consists  especially  of  the  fol- 
lowing classes  of  goods: 

the  profit  of  the  hitter.  He  hkewise  points  out  a  great  number  of  differences 
between  the  "  price  of  money  "  considered  in  its  rehition  to  trade,  and  in  its 
relation  to  loans.  He  explains  tlie  interest  on  capital,  as  Scliroiicr,  in  his 
Schatz-und  Rentkammer,  231,  and  Benjamin  Franklin^  in  his  Inquiry  into 
the  Nature  of  a  Paper  Currency  (1729)  had  done  before,  by  the  fact  that  the 
owner  of  capital  can  purchase  a  piece  of  land  with  his  capital,  and  thus  draw 
an  income  without  working.  Money,  he  said,  was  indeed  not  productive, 
but  neither  was  any  other  thing  that  could  be  loaned  or  leased,  with  the  ex- 
ception of  land  and  cattle.  Adam  Smith  deserves  the  greatest  credit  for  his 
analysis  of  the  idea  of  capital,  although  he  opposes  "  capital  "  to  what  the 
Germans  call  capital-in-use,  the  "stock  for  immediate  consumption."  When 
Canard,  Principes  d'Economie  politique  (iSoi)'  and  J.  B.  Say^  Cours  pra- 
tique, 1S28,  I,  285,  included  man's  power  of  labor  in  capital,  they  took  a  ret- 
rograde step.  "  Labour  is  Capital,  primary  and  fundamental."  Colton^ 
275.  Every  grown-up  individual,  says  McCulloch,  Principles,  1S25,  II,  ch. 
2,  may  be  looked  upon  as  a  machine  which  has-  cost  several  years  of  con- 
tinued care  and  a  considerable  sum  for  its  construction.  It  is  only  anoth- 
er side  of  this  same  perversity,  when  McCulloch  seeks  to  force  the  results 
produced  by  animals  and  machines  into  the  definition  of  labor.  ScJdozcr, 
Anfangsgriinde  (1S05),  I,  21,  goes  so  far  as  to  call  the  soul,  raw  material, 
which  receives  productive  power  from  the  labor  of  the  teacher!  For  a 
calculation  of  the  money  value  of  man  in  the  different  ages  of  life,  see 
Statis.  Journ.  XVI,  43  ft".  See,  on  the  other  hand,  Malthus,  Definitions,  ch . 
7;  and  Rossi,  in  the  Journal  des  Economistes,  VI,  113.  Nor  does  the  view 
of  Gaiiilh,  Systemes  d'Economie  politique  (1S09),  I,  243;  of  Ad.  Miillcr,  Con- 
cordia, 93  ff.,  211;  of  //c/";«rt««,.  jStaatswirth,  Untcrsuchungen,  No.  3;  of 
Dunoyer,  Liberie  du  Travail,  L.  VI;  of  Bastiat,  Carey  and  others,  who 
include  pieces  of  land  in  themselves  under  the  head  of  capital,  seem  to  be 
better  founded.  Hermann  defines  capital  the  durable  basis  of  every  utility 
possessed  of  value  in  exchange.  Scfiaffle  reckons  land  as  nature  offers  it  to 
us,  among  free  goods.  From  the  moment  that  labor  and  capital  are  spent 
upon  it,  it  becomes  immovable  capital,  but  he  concedes  that  it  still  pre- 
serves many  essential  points  which  distinguish  it  froin  other  capital.  (N. 
CEk.  Theorie  der  ausschliessenden  Absatz verbal tnisse,  1S67,  65  ff.,  89  ff.) 
These  differences  appear  to  me  to  be  still  more  important  than  that  which 
land  and  capital  have  in  common ;  especially  as  the  historic  development  of 
their  relations  proceeds  for  the  most  part  in  opposite  directions.  Thus,  for 
instance,  as  civilization  advances,  land  is  wont  to  become  dearer  and  capital 
cheaper.  How  difficult  would  it  be  to  introduce  clearness  into  the  ideas  of 
intensive  and  f.\-/e'W5?rc  agriculture,  if  land  were  accounted  capital!  And  it 
is  not  only  always  theoretically,  but  also  very  often,  in  practice,  possible  to 


152  PRODUCTION  OF  GOODS.  [B.  I,  Ch.  I. 

A.  Soil-improvements,  for  instance,  drainage  and  irrigation 
works,  dikes,  hedges  etc.,  which  are,  indeed,  sometimes  so  far 
part  of  the  land  itself  that  it  is  difficult  to  distinguish  them 
from  it.^    To  this  class  belong  all  permanent  plantations. 

B.  Buildings,  which  embrace  workshops  and  storehouses 
as  well  as  dwellings ;  also  artificial  roads  of  all  kinds. 

C.  Tools,  machines  and  utensils  of  every  description ;  *  the 
latter  especially  for  personal  service,  and  for  the  preservation 
and  transportation  of  other  goods.  A  machine  is  distinguished 
from  a  tool  in  that  the  moving  power  of  the  former  is  not  com- 
municated to  it  immediately  by  the  human  body,  which  only 
directs  it;  while  the  latter  serves  as  a  species  of  equipment,  or 
as  a  better  substitute  for  some  member  of  man's  body.^  To 
be  of  advantage,  these  three  kinds  of  capital  must  save  more 
labor  or  fatigue  than  it  has  cost  to  produce  them.  Tools  are, 
however,  older  than  machines.  The  aborigines  of  Australia 
used  only  a  lance  and  a  club  in  hunting;  the  somewhat  more 
civilized  American  Indians,  the  bow  and  arrow;  Europeans 
use  firearms :  in  all  of  which  a  gradual  progress  is  observable. 
Of  the  blind  forces  which  communicate  motion  to  machines, 
water  was  the  first  used,  then  the  wind,  and  last  of  all, 
steam.^ 


separate  the  value  of  a  given  piece  of  land  from  the  most  durable  capital- 
improvements  {Kapitahndiorationen )  made  on  it.  It  is  only  necessary  to 
call  to  mind  the  area  of  buildinjjs. 

2  Marx  makes  a  very  arbitrary  assertion  when  he  says  that  only  the  capital 
operating  in  trade,  and  even  only  that  operating  in  trade  where  money  is 
used  as  the  instrument  of  exchange,  can  properly  be  called  capital ;  and  that, 
therefore,  the  modern  biography  of  capital  dates  only  from  the  i6th  century, 
(Das  Kapital  I,  io6  ff.) 

^  See,  on  the  other  hand,  Wolkoff,  Lectures  d'Economie  politique  ra- 
tionelle,  167. 

■*  Hermann  (II  ed.,  238  if.)  distinguishes  especially  f7-eparatory  contrivances 
auxiliary  to  labor,  such  as  stationary  structures  etc.,  vessels,  tools,  machines 
and  instruments  for  measuring  etc. 

^  Thus,  for  instance,  the  plow  and  the  gun  are  machines,  the  spade  and  the 
blow-pipe  are  tools.  A  hammer  may  be  considered  as  a  hard,  insensible  jfist; 
the  bellows  as  a  pair  of  very  strong  and  durable  lungs.     Tongs  take  the 


Sec.  XLIi.]  CAPITAL.  153 

D.  Useful  and  labor i)ig  animals^  in  so  far  as  they  are  raised, 
fed  and  developed  by  human  care. 

E.  Materials  for  transformation  (  Verwandlungsstoffc) :  either 
the  principal  material  which  constitutes  the  essential  substance 
of  a  new  product,  the  yarn  of  the  weaver  for  instance,  the 
raw  wool,  silk  or  cotton  of  the  spinner ;  or  the  secondary  ma- 
terial which,  indeed,  enters  into  the  work,  but  only  for  pur- 
poses of  ornamentation,  as  gold-leaf,  lac,  colors  etc. 

F.  Auxiliary  substances,  which  are  consumed  in  production, 
but  do  not  constitute  a  visible  part  of  the  raw  product,'''  as  coal 
in  a  smithy,  powder  in  the  chase  or  in  mining,  muriatic  acid, 
in  the  preparation  of  gelatin,  chlorine  in  bleaching  etc. 

G.  Mea)is  of  subsistence  for  the  producers,  which  are  ad- 
vanced to  them  until  production  is  complete. 

H.  Commercial  stock,  which  the  merchant  keeps  always  on 
hand  to  meet  the  w^ants  of  his  customers. 

I.  Money  as  the  principal  tool  in  every  trade  that  is  made. 

K.  There  is  also  what  may  be  called  iiicorporeal  capital 
(quasi-capital  according  to  Schmitthenner),  which  is  as  much  the 
result  of  production  as  any  other  capital,  and  is  used  in  pro- 
place  of  fingers,  just  as  a  spoon  does  of  the  empty  hand,  and  the  knife  the 
place  ot  the  teeth.  A  great  number  of  machines,  on  the  other  hand,  may 
be  compared  to  a  complete  workman.  Thus,  the  action  of  the  mill  -which 
grinds  grain  has  very  little  resemblance  to  the  blowing  of  the  wind  or  the 
running  of  the  water,  whereas  the  rising  and  falling  of  the  pestle  in  the 
small  mortar  for  throwing  grenades  corresponds  to  the  motion  of  the  arm. 
(Hctu,  Lehrbuch  I,  §  125.)  The  infinite  number  of  functions  of  which  our 
members  are  capable  is  related  to  their  inability  to  attain  alone  the  greater 
number  of  their  ends.  Hence  animals  which  require  no  tools  can  undertake 
to  achieve  very  few  things.    "  Man  is  a  tool-making  animal."   (B.  Franklin.) 

*  This  is  seen  most  clearly  in  the  history  of  the  grinding  of  corn.  In  the 
time  of  Moses,  and  even  of  Homer,  there  were  only  hand-mills,  and  originally 
only  mortars.  Later,  mills  set  in  motion  by  horse-power  were  employed. 
Shortly  after  Cicero's  time,  mills  driven  by  water-power  came  into  use. 
Brunck,  Analecta,  II,  119,  Ep.  39.  Mills  built  on  pontoons  do  not  date  farther 
back  than  the  time  of  Belisarius.  Wind-mills  have  been  known  since  the. 
ninth  century;  Dutch  wind-mills,  only  since  the  middle  of  the  i6th  century. 
See  Beckman^  Beitrage  zur  Geschichte  der  Erfindungen  II,  I  flf. 

'  Compare  Plato.,  Polit.,  2S0. 


154  PRODUCTION  OF  GOODS.  [B.  I,  Ch  I. 

duction,  but  which,  for  the  most  part,  is  not  exhausted  by  use. 
There  are  species  of  this  kind  of  capital  which  may  be  trans- 
ferred, as  for  instance,  the  good  will  of  a  well-established  firm. 
Others  are  as  inseparably  connected  with  human  capacity  for 
labor  as  soil-improvements  with  a  piece  of  land;  c.  g,^  the 
greater  dexterity  acquired  by  a  workman  through  scientific 
study,  or  the  greater  confidence  he  has  acquired  by  long  trial.^ 
The  state  itself  is  the  most  important  incorporeal  capital  of 
every  nation,  since  it  is  clearly  indispensable,  at  least  indi- 
rectly, to  economic  production.^ 

The  greater  portion  of  the  national  capital  is  in  a  state  of 
constant  transformation.  It  is  being  continually  destroyed  and 
reproduced.  But  from  the  stand-point  of  private  economy, 
as  well  as  from  that  of  the  whole  people,  we  say  that  capital 
is  preserved,  increased  or  diminished  according  as  its  value  is 
preserved,  increased  or  diminished.^"  Prctiimi  succedit  in  lo- 
ciim  roi  ct  res  in  locum  -pretii.  "  The  greater  part  in  value  of 
the  wealth  now  existing  in  England,  has  been  produced  by  hu- 
man hands  within  the  last  twelve  months.  A  very  small  pro- 
portion indeed  of  that  large  aggregate  was  in  existence  ten 
years  ago;  of  the  present  productive  capital  of  the  country, 
scarcely  any  part  except  farm-houses  and  a  few  ships  and  ma- 

*Thus,  Gantl'i,  Theorie  de  I'Economie  politique  I,  133,  calls  the  knowl- 
edge, talents  and  probity  of  meixhants,  as  well  as  their  reputation,  valuable 
parts  of  their  capital  in  trade.  See,  also,  Moser^  Patriot.  Ph.  II,  26.  See 
some  happy  observations  on  the  intellectual  capital  of  nations,  as  consisting 
of  "  known  and  unknown  preparatory  labor  through  their  history,"  in  Lotze, 
Mikrokosomos  II,  353  scq. 

^  Compare  Dictzel,  System  der  Staatsanleihen  (1S56),  71  ff.  And,  earlier 
yet,  Ad.  Miiller  had  looked  upon  taxes  not  in  the  light  of  an  insurance  pre- 
mium, but  as  "  the  interest  of  the  invisible  and  yet  absolutely  necessarj'  in- 
tellectual capital  of  the  nation."  (Elemente,  III,  75.)  Of  course,  the  State 
is  much  more  than  a  species  of  capital;  just  as  a  Gothic  cathedral  is  some- 
thing more  than  a  piece  of  masonry,  but  does  not  on  that  accout  cease  to  be 
a  piece  of  masonry. 

'"  'J.  B.  Say,  Traite  d'Economie  Politique  I,  ch.  10.  Only  think  of  what 
is  known  in  physiology  as  the  change  or  transformation  of  matter 
(Stoffvjcchsel  I). 


Sec.  XLIII.]  CAPITAL.  155 

chines;  and  even  these  would  not,  in  most  cases,  have  sur- 
vived so  long,  if  fresh  labor  had  not  been  employed  within 

that  period  in  putting  them  into  repair Capital  is  kept 

in  existence  from  age  to  age  like  population,  not  by  preserva- 
tion, but  by  reproduction."     {y.  S.  31ill.) 

SECTION  XLIII. 

CAPITAL.  —  PRODUCTIVE  CAPITAL. 

Capital,  according  to  the  employment  that  can  be  given  it, 
may  be  divided  into  such  as  affects  the  production  of  material 
goods,  and  such  as  affects  personal  goods  or  useful  relations. 
The  former,  under  the  name  of  productive  capital,  is,  in  recent 
politico-economical  literature,  usually  opposed  to  capital  in 
use.^  Evidently  any  one  of  the  two  kinds  of  capital  mentioned 
above,  may  be  used  for  both  purposes.^  Indeed,  the  two 
classes  are,  in  many  respects,  coincident.  Thus,  a  livery-stable 
carriage  or  a  circulating  library  is  productive  capital  to  its 
proprietor,  and  capital  in  use*  {Gcbranchskapital^  to  the  nation 

'  Productive  capital  lias  been  rendered  into  German  by  the  word  Erxverb- 
stainm,  by  the  author  of  "  Staatswirthschat't  nach  Naturgesetzen,"  1S19. 
Aldlthus,  Definitions,  ch.  10,  and  Ran,  Lchrbuch,  I,  §  51,  call  productive  cap- 
ital alone,  capital.  According  to  M.  Chevalier^  goods  lose  their  quality  of 
capital  as  soon  as  they  come  into  the  hands  of  a  consumer.  ScJidffle,  N. 
CEk.,  II,  aufl.,  59,  calls  capital  in  use  Genussvermogen  (resources  intended  for 
enjoyment)  and  productive  capital,  Kapitalvermogen  (capital-resources).  On 
the  other  hand,  J.  B.  Say,  Traite,  I,  \y,  McCtdloch,  Principles,  II,  2,  3;  Her- 
mann, Staatswirthschaft.  Untersuchungen,  p.  60  ft*.,  and  v.  Mangoldt,  Volks- 
Avirthschaftslehre,  122,  divide  capital  into  capital  in  use  and  productive  capi- 
tal, according  as  it  provides  the  possessor  with  that  which  he  may  tm-n  to 
account  directly  or  indirectly  by  becoming  the  owner  of  goods  through  its 
ineans.  Aristotle  distinguishes  between  0(>yava  and  XT'/jptaza^  the  former 
relating  to  Tioir.ac:;;  for  instance,  a  shuttle;  the  latter  to  Tzod^:^^  as,  for  in- 
stance, bedding  and  articles  of  dress.     (Polit.,  I,  2,  5.) 

"Thus,  for  instance,  class  A  embraces  parks  and  forests;  B,  theaters, 
churches,  manufactories,  arsenals,  granaries,  public  walks  and  roads.  Walks 
can,  besides,  be  used  for  the  cultivation  of  fruit,  and  roads  for  pleasure  trips. 

*  Translated  "capital  de  consommation  "  by  W^olowski,  p.  96  of  his  Rosch- 
er's  Principles.  —  Translator's  note. 


156  PRODUCTION  OF  GOODS.  [B.  I,  Ch.  I. 

in  general;  although  the  circulating  library  from  which  an 
Arkwright  obtains  technic  information,  or  the  livery-stable 
vehicle  which  carries  a  Borsig  to  his  counting-room,  has  cer- 
tainly been  used  in  the  production  of  material  goods.  Almost 
all  capital  in  use  may  be  converted  into  productive  capital, 
and  hence,  the  former  might  be  called  quiescent  capital,  and 
the  latter  working  capital.^  One  of  the  principal  difterences 
between  productive  capital  and  capital  in  use  is,  that  the  for- 
mer, even  when  most  judiciously  employed,  does  not  so  imme- 
diately replace  itself,  as  the  latter,  by  its  returns.*  On  the  other 
hand,  the  real  dividing  line  between  capital  in  use,  and  objects 
consumed  which  are  not  capital,  is,  and  it  is  in  complete  har- 
mony with  our  definition  of  capital,  that  the  latter  are  subject 
not  only  to  a  more  speedy  destruction  and  one  which  is  always 
contemplated,  while  in  the  case  of  the  former,  its  destruction 
is  only  the  unintended  reverse-side  of  its  use. 

Among  a  highly  civilized  people,  a  great  amount  of  capital 
in  use,  as  compared  with  the  productive  capital  of  the  country, 
may  be  considered  a  sure  sign  of  great  wealth.  When  this 
is  the  case,  the  people,  without  losing  the  desire  of  further  ac- 
quisition, think  that  they  have  enough  to  richly  enjoy  the 
present.  I  need  only  call  to  mind  the  munificence  displayed 
by  the  middle  classes  in  England,  in  their  silver  plate  and 
other  domestic  utensils.  But  the  people  of  Russia,  and  Mex- 
ico also,  can  make  no  mean  display  of  silverware.^     Here  lux- 

^  Dead,  or  better,  dormant  capital  is  such  productive  capital  as,  for  the  time 
being,  remains  unvised,  and  -which,  therefore,  does  not  yield  even  personal  en- 
joyment. The  sum  total  of  this  kind  of  capital  is  very  much  diminished  by 
the  agency  of  savings  banks.  Loaned  capital  which  has  been  employed  un- 
productively  evidently  constitutes  no  longer  a  part  of  the  wealth  of  a  people. 
See  infra^  §  189. 

*  Wolhoff  is  so  far  right,  when  in  his  Lectures,  p.  142,  he  calls  the  return 
of  capital  in  use  not  revenii.,  but  ddstruction  graduclle.  ScJtdffle  is  right,  too, 
and  entirely  so,  when  he  says  that  only  such  an  increase  of  the  property,  in- 
tended for  enjoyment  simply,  is  anti-economic,  as  does  not  make  the  per- 
sonal capacities  of  labor  ( Arbeit svermogcn)  as  much  more  productive  than 
they  would  otherwise  be.     N.  Oik.,  II,  aufl.,  224. 

^ Humboldf^  N.  Espange,   II,  ch.  17;  v.  Sc/dozcr,  Anfangsgrliiule,  II,  109. 


Sec.  XLIIL]  CAPITAL.  157 

ury  is  only  a  symptom  of  the  disinclination  or  inability -of  the 
inhabitants  of  the  country  to  use  their  capital  in  the  production 
of  wealth.  How  much  richer  would  Spain  be  to-day,  if  it  had 
employed  the  idle  capital  spent  in  the  ornamentation  of  its 
churches  in  constructinfj  roads  and  canals!"  Most  nations  in 
a  low  state  of  civilization  suflerfrom  the  absence  of  legal  guar- 
anties. Each  one  is  compelled  to  turn  his  property  into  a 
shape  in  which  it  can  be  most  easily  transferred  from  one 
place  to  another  and  hidden.     This  is  the  principal  reason  why 


Ausland,  140,  No.  313.     On  the  extraordinary  wealth  of  even  Russian  peas- 
ant women  in  pearls,  see  v.  HaxtJiausen,  Studien,  87,  309. 

^  Tozvnsend, '^oum^y  in  Spain,  I,  115,  310.  In  the  patriarchal  age  of  the 
Jews,  there  was  a  relatively  very  large  quantity  of  ornamental  objects  in 
gold  and  silver:  Mkhcclis,  Dc  Pretiis  Reruni  apud  Hebrreos,  in  the  Comm. 
Soc.  Getting.,  Ill,  151  il,  160.  Conservative  Sparta,  in  the  middle  age  of  its 
history,  was  certainly  not  rich,  and  yet  it  had  more  gold  and  silver  than  any 
other  Grecian  state:  Plato,  Alcib.,  I,  123.  Accordjng  to  St.  John,  The 
Hellenes,  III,  142,  the  ancients  had  relatively  much  more  of  the  precious 
metals  in  the  form  of  objects  for  ornament  than  the  moderns.  The  Romans, 
with  their  usual  good  sense,  did  not  make  use  of  silver  as  an  article  of  lux- 
ury until  they  had  attained  great  wealth.  See  Cato,  R.  R.,  ch.  23,  and  Sen- 
eca, De  Vita  bcata,  ch.  21.  Then  the  Carthagenian  ambassadors  railed  at 
their  hosts  because  they  found  the  same  pieces  of  table  silver  in  all  the  houses 
to  which  they  were  invited.  The  younger  Scipio,  even,  did  not  possess  more 
relatively  than  32  pounds  of  silver  ware.  Mommsen,  ROmische  Geschichte,  II, 
383.  The  relatively  great  importance  of  the  stores  for  domestic  use,  never- 
theless, runs  through  the  whole  of  Roman  history.  The  title  ffc /<?;/«  legato, 
in  the  Pandects  (Digest,  XXIII,  9),  points  to  this,  during  the  reign  of  the 
emperors,  aud  in  earlier  times,  the  derivation  oi  fcnatcs  honi  J'cnu.  See  I^od- 
bertus,  in  Hildebrand'' s  Jahrbuch,  1S70,  I,  365.  Immense  importance  of  the 
ring  in  the  old  north  countries:  Weinhold,  Altnord.  Leben,  1S4  ft".  The  age 
of  chivalry  was  very  rich  in  silver  plate,  cups,  basins,  etc.  BUsching,  Ritter- 
zeit  und  Ritterwesen,  II,  137.  Anderson,  Origin  of  Commerce,  a.  13S6.  Lord 
Burleigh,  in  the  age  of  queen  Elizabeth,  left  after  him  between  fourteen  and 
fifteen  thousand  pounds  sterling  in  silverware;  that  is  almost  as  much  as 
the  rest  of  his  whole  estate;  and,  it  would  seem,  that  for  a  man  of  his  rank, 
even  this  was  not  considered  a  great  deal.  Collins'  Life  of  B.,  44.  Accord- 
ing to  Giiistiniani,  cardinal  Wolsey  owned  articles  of  silver  to  the  value  of 
1,500,000  ducats,  and  the  greater  number  of  the  lords  of  the  time  were  equally 
well  provided  with  them. 


158  PRODUCTION  OF  GOODS.  [B.  I,  Ch.  II. 

tlie  Orientals  possess,  relatively  speaking,  so  man}^  precious 
stones  and  so  much  of  the  precious  metals.  The  same  cause 
accounts  for  the  simplicity  of  their  dwellings.'''  On  the  other 
hand,  productive  capital  is  to  be  found  in  the  greatest  propor- 
tion among  civilized  nations  which  are  making  very  rapid  strides 
towards  wealth,  the  people  of  the  United  States,  for  instance. 

SECTION  XLIV. 

CAPITAL.— FIXED  CAPITAL,  AND  CIRCULATING  CAPITAL. 

Capital,  according  as  it  is  employed,  is  divided  into  fixed 
capital  and  circulating  capital.  Fixed  capital  may  be  used 
many  times  in  production  by  its  owner;  circulating  capital 
only  once.  The  value  of  the  latter  kind  of  capital  passes 
wholly  into  the  value  of  the  new  product.  In  the  case  of  the 
former  kind  of  capital,  only  the  value  of  its  use  passes  into  the 
new  product.  {Hermann^  Hence,  the  farmer's  beasts  of 
burthen  belong  to  his  fixed  capital;  their  food,  and  his  cattle 
intended  for  the  slaughter,  to  his  circulating  capital.  In  a 
manufactory  of  machines,  a  boiler  intended  for  sale  is  circulat- 
ing capital;  while  a  similar  one,  held  in  reserve  for  the  ma- 
chines used  in  production,  is  fixed  capital.  Ricardo  attributes 
a  somewhat  different  meaning  to  these  two  terms:  he  calls 
fixed  capital  that  which  is  slowly  consumed,  and  circulating, 

'  The  Bedouins  are  fonJ  of  decorating  their  wives  and  children  with  all 
the  jewels  that  they  possess,  both  on  holidays  and  other  days,  so  that  thej 
sometimes  have  four  or  six  bracelets  on  each  arm  and  fifteen  ear-rings  in 
each  ear.  ^«?rMa;-rt'/,  Bcmerkungen,  i8S.  7Fc//.?/t?<f(Roederer's  translation), 
I,  224.  In  Asia  Minor,  girls  wear  their  whole  dowry  in  the  shape  of  per- 
sonal ornaments.  Belgiojoso,  Revue  des  deux  Mondes,  Feb.  i,  1855.  ^^ 
East  India  even  the  most  wretched  towns  have  their  silver  workers.  The 
emirs  of  Scinde,  with  an  annual  income  of  £300,000,  had  a  treasure  worth 
£20,000,000,  nearly  £7,000,000  of  which  were  in  jewels.  Ritter^  Erdkunde 
VII,  p.  185.  On  the  upper  Ganges  more  jewels  and  other  ornaments  are 
worn  than  on  the  lower,  where  the  wealthy  prefer  to  spend  their  capital  on 
landed  estates.     Ritier,  VI,  1143. 


Sec.  XLIV.J  CAPITAL.  159 

that  which  disappears  rapidly.^  Fixed  capital  is,  indeed,  pro- 
duced and  preserved  by  circulating  capital;  but  it  is,  lor  the 
most  part,  transformed  agciin  into  circulating  capital."  Be- 
sides, it  is  only  by  means  of  the  latter,  that  the  former  can  be 
productively  emplo3-ed.^  The  relative  importance  of  fixed 
and  circulating  capital  to  a  country  depends  upon  whether  the 
country  is  an  advanced  or  only  an  advancing  one.  A  people 
with  very  much  and  very  fixed  capital  are  indeed  very  rich; 
but  run  the  risk  of  offering  many  vulnerable  points  to  an 
aggressive  enemy,  and  of  thus  turning  the  easily  jeopardized 
mammon  into  an  idol.  To  make  a  passing  sacrifice  of  the 
country-  that  the  people  and  the  state  may  be  saved,  as  did  the 
Scythians  against  Darius,  the  Athenians  against  Xerxes,  and 
the  Russians  against  Napoleon,  becomes  difiicult,  in  propor- 
tion as  the  nation  has  become  richer  in  fixed  capital.'*     But,  as 

'  The  first  beginnings  of  this  division  are  to  be  found  in  ^^tiesnay  (Analyse 
du  Tableau  economique,  175S),  in  which  he  develops  the  difference  between 
avances  primitives  and  avances  annudlcs.  See  also  Adam  Smith,  W.  of  N.,  II, 
ch.  I,  who,  however,  reduces  the  difference  between  them  mainly  to  the  rela- 
tions of  possession,  and  hence  includes  grain  and  seed  in  fixed  capital.  Her- 
mann, Staatsw.  Untersuch^  269  ff. ;  Ricardo,  Principles,  ch.  i,  sec.  2;  Schmitt' 
henncr,  Staatswissenschaften,  I,  3S7,  divides  capital  into  I,  infitngiblc,  that  is, 
I,  fixed  in  the  strict  sense  of  the  word;  2,  transportation-capital;  II,  fungible, 
I,  transformable  capital;  a,  material  (raw  material,  auxiliary  material  etc.), 
b,  formed  products ;  2,  circulating  capital ;  a,  wares ;  b,  money.  A.  Walhor, 
S.  of  W.,  57,  calls  circulating  capital  that  which  may  be  easily  transferred 
from  one  branch  of  production  to  another;  fixed,  that  which  can  be  used  with 
advantage  onlj  for  the  purpose  for  which  it  was  originally  intended. 

*  Old  wood-work  is  burned ;  old  iron  utensils  sold ;  also  houses  when  pulled 
down.     Emminghaus,  Allg.  Gewerbelehre,  186S,  175. 

3  If  the  Mongols,  for  instance,  should  despoil  China  of  all  its  moveable 
property  with  the  exception  of  its  buried  money,  its  immovable  property 
would  become  productive  only  from  the  time  that  that  money  would  be  used 
to  secure  other  moveable  articles.  In  any  case,  the  production  would  be 
proportioned  only  to  the  borrowed  seed,  cattle,  etc.  (Sismondi,  Richesses 
commcrciale,  1S03,  I,  p.  61. 

■•That  the  Athenians  left  everything  in  the  lurch  to  oppose  Xerxes,  much 
more  readily  than  under  Pericles,  even,  the  flat  country  of  Attica.  BUchsen- 
schi/tz  (Bcsitzund  Erwerbim  gricch.  Altcrthum,  5S9)  explains  by  the  fact  that 
in  the  interval  between  the  two  periods,  fixed  capital  increased  largely.  In  rude 


160  PRODUCTION  OF  GOODS.  [B.  I,  Ch.  I. 

the  destination  of  the  latter  is  changed  with  much  greater  dif- 
ficulty than  that  of  circulating  capital,  highly  cultivated  na- 
tions would  find  it  very  hard  to  satisfy  new  wants,  if  they 
could  not  always  appropriate  the  results  of  additional  savings 
to  the  production  of  new  fixed  capital. 

SECTION  XLV. 

CAPITAL.  — HOW  IT  ORIGINATES. 

Capital  is  mainly  the  result  of  saving  which  withdraws  new 
products  from  the  immediate  enjoyment-consumption  of  their 
possessor,  and  preserves  them,  or  at  least  their  value,  to  serve 
as  the  basis  of  a  lasting  use.^  As  capital  represents  the  solid- 
arity of  the  economic  past,  present  and  future,  it,  as  a  rule, 
reaches  back  into  the  past  and  forward  into  the  future,  through 
a  period  of  time  longer  in  proportion  as  its  amount  and  efficiency 
are  greater.^  Those  producers,  too,  whose  pi-oducts  perish 
rapidly  may,  also,  efi:ect  savings  by  exchanging  their  products 

ages  under  the  appellation  of  a  community  or  nation  was  understood  a  number 
of  men ;  and  the  state,  while  its  members  remained,  was  accounted  entire. 
With  polished  and  mercantile  states,  the  case  is  sometimes  reverted.  The  nation 
is  a  territory  cultivated  and  improved  by  its  owners ;  destroy  the  possession 
even  while  the  master  remains,  the  state  is  undone.  Ferguson^  Hist,  of  civil 
Society,  V,  4;  f.  Mangoldt^  Volkswirthschaftslehre,  159.  Fixed  capital  is 
not  so  sure  of  being  completely  used  up  as  circulating.  On  this  point  see 
Schdffle,  N.  CEk.,  53. 

1  If  the  aggregate  productive  activity  of  man  be  designated  by  the  word 
labor  (just  as  everything  produced  on  a  piece  of  land  is  inaccurately  called 
its  product),  then  all  capital  may  be  considered  as  the  unconsumed  result  of 
labor.  The  recent  socialistic  theory  that  considers  capital  as  the  wages 
which  have  been  earned  but  not  paid,  is  a  gross  misconception  of  this  truth. 
This  is  the  origin  only  of  the  capital  of  oppressors  and  deceivers,  and  of 
theirs  only  in  part.     See  infra,  §  1S9. 

5 "  While  we  are  clothed  in  our  winter  garments,  the  spring  stuffs  are  al- 
ready in  the  shops  of  retail  dealers;  the  light  material  of  next  summer's  wear 
is  already  manufactuinng,  and  the  wool  for  our  next  winter's  clothing  spun." 
Think  of  the  study  in  advance  which  the  physician  must  have  gone  through, 
whom  we  summon  to  us  at  a  moment's  notice!  Monger,  Grundsatze,  I,  § 
33.  seq. 


Sec.  XLV.]  CAPITAL.  IGl 

and  capitalizing  their  counter-value.  Thus,  the  actor,  ^vhose 
playing  leaves  after  it  nothing  but  a  memory,  may  use  the 
wheat  received  by  him  from  a  farmer  who  came  to  listen  to 
him,  in  the  employment  of  an  iron-worker,  and  invest  the 
product  permanently  in  a  railroad.  The  transformation  may 
be  efiected  by  means  of  mone}",  bonds  etc.,  but  it  is  none  the 
less  real  on  that  account.  Order,  foresight  and  self-restraint 
are  the  intellectual  conditions  precedent  of  saving  and  capital. 
The  childish  and  hail-fellow-well-met  disposition  which  cares 
only  for  the  present  is  inimical  to  it.  True,  the  desire  of  sav- 
ing can  be  developed  only  where  there  are  legal  guaranties  to 
ownership ;  ^  guaranties  which  are  both  the  conditions  prece- 
dent and  the  effect  of  all  economic  civilization.'*  The  Indians, 
Esquimaux  etc.,  had  to  be  taught  for  the  first  time  by  the  mis- 
sionaries and  merchants — and  it  was  with  the  greatest  difficulty 
it  was  done  —  to  save  their  booty,  and  spare  the  natural  sources 
of  their  acquisition.  Originally,  they  were,  in  the  heat  and 
excitement  of  their  wild  hunting  and  fishing,  wont  to  destroy 
on  the  spot  what  they  could  not  enjoy  in  the  moment.^  In  the 
lowest  stages  of  civilization,  the  first  saving  of  capital  of  any 
importance  is  efl:ected  frequently  through  robber}^  or  in  the 
way  of  slavery.^  In  both  cases,  it  is  the  stronger  who  com- 
pel the  weaker  to  consume  less  than  they  produce.     See  in- 

^  Thus  in  dangerous  callings,  as  for  instance,  among  soldiers  and  sailors, 
there  is  very  little  saving.  The  same  may  be  said  of  times  of  plague.  See 
y.  Rae,  New  Principles  on  the  Subject  of  Political  Economy,  1S34. 

•*That  we  keep  our  property  under  lock  and  key,  while  it  was  customary 
in  Plato's  time  to  seal  it  up,  is  in  itself  a  great  advance.  See  Becker, Chari- 
cles,  1, 202  seq.  Earlier  yet,  artificial  knots  were  used.  Homer,  Odyss. 
VII,  443. 

s  Compare  Hearne^  Reise,  nach  Prinzwalesfort,  43,  58,  119.  Barrow  von 
Sfrengel,  282.  Hnmholdt,  Relation  historique,  II,  245.  Ausland,  1844,  No. 
359;  1845,  No.  84.  Steiu-Wapj>aus,  Handbuch  der  Geographic,  I,  310.  For 
proof  that  the  clergy  by  preaching  self  denial  contributed  largely  to  the  crea- 
tion of  capital  in  the  earlier  part  of  medieval  history,  see  Giidrard,  Polyp- 
tiques  d'lrminon  Pref.,  13. 

s  On  the  inevitableness  of  slavery,  where  capital  is  needed,  and  no  one  cares 
to  save,  see  de  Mctz  Noblet,  Phenomcncs  economiques,  I,  306. 
Vol.  I. — n 


162  PRODUCTION  OF  GOODS.  [B.  I,  Ch.  I. 

fra^  §  68.  Where  civilization  is  at  its  highest,  the  inclination 
to  save,  as  a  rule,  is  very  marked.'  It  begins  to  decline  where 
a  people  are  themselves  declining  in  civilization,  and  especially 
where  legal  guaranties  have  lost  their  force. 

But  capital  may  be  increased  even  without  personal  sacri- 
fice ;  as  for  instance,  by  mere  occupation,  as  of  certain  goods, 
not  hitherto  recognized  as  such.  Thus,  also,  by  the  establish- 
ment of  valuable  relations,  the  advantages  of  which  either  be- 
come the  common  good  of  all;  or  which,  because  at  the 
exclusive  command  of  one  individual,  obtain  value  in  ex- 
change. The  progress  of  civilization  itself  may  increase  the 
value  of  existing  capital.  Thus,  for  instance,  a  house,  consid- 
ered as  capital,  may  double  in  value  if  a  frequented  street  be 
opened  in  its  neighborhood.  To  this  category  belong  all  im- 
provements in  the  arts  which  enable  existing  capital  to  achieve 
more  than  it  could  before.  The  invention  of  the  compass  in- 
creased the  value  of  the  capital  employed  in  the  merchant 
marine  to  an  extent  that  cannot  be  calculated.^  The  increase 
of  capital  effected  by  saving  soon  finds  a  limit  unless  such 
limit  is  widened  by  the  progress  of  civilization.^  ^*' 

'  The  origination  of  capital  by  "  social  connexions  "  ( gcsellschaftliche  Zus- 
ammenhdnge)  Lassalle  (Bastiat-Schultze,  92,  98)  exaggerates  into  the  absurd- 
ity that  no  capital  was  ever  saved.  This  is  in  part  related  to  his  confounding 
land  with  capital  (103  seq.).  On  the  other  hand,  P.  L.  (v.  Ltlienfeld),  Ge- 
uanken  iiber  de  Staatswissenschaft  der  Zukunft  (1S73),  distinguishes  between 
the  external  and  internal  creation  of  capital  in  human  society ;  the  latter  based 
on  the  condition  of  evei'y  organic  being,  by  virtue  of  Avhich  the  present  is 
generated  by  the  past,  and  generates  the  future.  The  intercellular  substance 
of  plants,  the  honey-comb  of  bees,  and  the  blood  in  the  animal  body,  corres- 
pond to  the  capital  of  a  nation. 

^  Hermann^  St.  Untersuchungen,  2S9  ff. ;  List^  System  der  politischen 
CEkonomie,  I,  325  fF.  Thus,  for  instance,  capitalization  among  a  race  of 
hunters  may  be  continued  longest  by  the  creation  of  herds;  that  of  a  race  of 
shepherds  by  the  building  of  houses,  and  by  land-improvements;  that  of  an 
agricultural  people  by  the  establishment  of  trades,  artificial  roads,  etc.  As 
to  how,  in  general  the  accumulation  of  goods  to  any  great  extent,  supposes 
exchange,  and  as  to  how,  first  of  all,  with  exchange  through  the  existence  of 
a  superabundance  wealth  may  originate,  see  Hermann,  loc.  cit.,  II,  Aufl., 
25  flf. 


Sec.  XLVI.]  PRODUCTIVE  CO-OPERATION.  1G3 


CHAPTER  II. 

CO-OPERATION  OF  THE  FACTORS. 


SECTION  XLVI. 

THE  PRODUCTIVE  C0<3PERATI0N  OF  THE  THREE  FACTORS. 

All  economic  production  generally  demands  the  coopera- 
tion of  the  three  factors:  external  nature,  labor  and  capital. 
But  with  the  political  economist,  labor  is  the  principal  thing; 
and  not  merely  because  all  capital  presupposes  labor,  nor  be- 
cause every  combination  of  the  three  factors  is  an  act  of  labor ; 

^  The  annual  increase  of  the  capital  of  France  during  the  later  years  of 
Louis  Philippe's  reign,  Avas  estimated  at  from  200  to  300  million  of  francs ; 
during  the  best  years  of  Napoleon  Ill's  reign,  at  600  million.  Journal  des 
Econ.,  Nov.,  1S61,  170.  The  capital  of  the  British  empire,  judging  from  the 
statistics  of  the  income  tax,  increased  from  1843  to  1853,  in  Great  Britain 
alone,  at  least  £42,000,000  yearly;  from  1S54  to  1S60,  in  the  whole  empire,  at 
least  £114,000,000;  and  in  1S63  alone  by  £130,000,000.  London  Statis.  Jour- 
nal, 1864,  iiS  ff.  A  war  carried  on  on  English  soil  would  doubtless  be  more 
destructive  of  capital  than  one  waged  in  Russia;  but  Russia  would  recover 
from  one  like  that  of  1854-55  with  much  gi-eater  difficulty  because  of  the 
small  tendency  of  its  people  to  amass  capital.  In  countries  in  which  the 
middle  classes  preponderate,  the  influence  of  the  amassing  of  capital  on  for- 
eign politics  is  one  that  favors  peace.  In  despotic  or  democratic  countries,  it 
may  as  readily  favor  war. 

'•^  The  "  absolute  formation  "  of  capital  above  described  is,  of  course,  the  only 
one  in  the  general  economy  of  mankind.  In  the  economy  of  individuals,  we 
frequently  meet  with  another  which  is  only  "  relative,"  as  when  the  increase 
of  one's  resources  is  attended  by  as  great  or  even  greater  decrease  of  anoth- 
er's. This  is  the  case,  for  instance,  where  privileges  or  monopolies  are  granted. 
The  same  phenomenon  is  found  also  in  the  intercourse  of  economies  of  differ- 
ent nations.     S//J>>-a,  §  64. 


1(3-1,  PRODUCTION  OF  GOODS.  [B.  I,  Ch.  II. 

but,  in  general,  because  "  the  human  mind's  idea  of  means  and 
ends  makes  all  goods  goods  for  the  first  time."     {Huf eland.) 

Leaving  the  free  forces  of  nature,  surrounded  by  which  we 
live  and  work,  out  of  consideration,  and  also  the  fact  that  all 
raw  material  is  due  to  nature,  land  is  the  indispensable  found- 
ation of  all  economy.  But  how  little  can  unassisted  nature  do 
to  satisfy  human  wants!  How  much  less  to  produce  goods 
possessed  of  value  in  exchange!  A  virgin  forest,  for  instance, 
sold  in  its  natural  state,  has,  indeed,  value  in  exchange,  but 
only  because  it  is  taken  into  account  that  it  can  be  cleared, 
and  that  there  are  means  of  transportion  already  existing.-^ 
The  greater  part  of  the  forces  of  nature  are  latent  to  nomads 
and  nations  of  hunters.  When  labor  develops,  they  are  set 
free  to  assist  it.^  It  is  very  seldom  that  any  thing  can  be  pro- 
duced without  capital.  Even  the  poorest  gatherer  of  wild  ber- 
ries needs  a  basket  and  must  be  clothed.^  Were  there  no 
capital,  every  individual  would  have  to  begin  at  the  very  be- 
ginning every  moment.  Life  would  be  possible  only  in  a 
tropical  climate.  No  man,  since  the  days  of  Adam,  has  been 
able  to  labor,  except  on  the  condition  that  a  considerable  ad- 
vance of  capital  had  been  made  upon  him.  There  is  not  a 
nail  in  all  England,  sa^'-s  Senior,  which  cannot  directly  or  in- 

'  Thus  Cieero^  De  Oft",  II,  3,  4.  Nature  may  indeed  produce  mere  value 
in  use  without  the  cooperation  of  labor,  in  the  narrow  sense  of  the  word ;  as,  for 
instance,  a  forest  which  protects  a  district  from  avalanches  etc.  But  "  every- 
thing which  has  been  ti-ansformed  into  goods  tends  constantly  to  return  to  its 
natural  state,  and  to  withdraw  itself  from  the  life  of  goods.     Stchi,  Lehrbuch. 

*  Compare  List,  System  der  Polit.  CEkon.  But  see  also  the  very  fine  dis- 
cussion of  y.  S.  Mill,  Principles,  IV,  ch.  VI,  2,  on  the  dreariness  of  nature, 
when  taken  exclusive  possession  of  by  man;  "with  every  rood  of  land 
brought  into  cultivation  which  is  capable  of  growing  food  for  human  beings; 
every  flowery  waste  or  natural  pasture  plowed  up ;  all  quadrupeds  or  birds 
which  are  not  domesticated  for  man's  use,  exterminated  as  his  rivals  for  food; 
every  hedgerow  or  superfluous  tree  rooted  out,  and  scarcely  a  place  left  where 
a  wild  shrub  or  flower  could  grow,  without  being  eradicated  as  a  weed,  in  the 
name  of  improved  agriculture." 

3In  Paris,  in  1820,  the  necessary  tools  of  a  rag-gatherer  cost  6^  francs. 
Gamier,  Elements  d'Econ.-polit.,  43. 


Sec.  XLVIL]        PRODUCTIVE  CO-OPERATION.  1G5 

directly  be  traced  back  to  savings  made  before  the  Norman 
conquest,* 

SECTION  XLVIL 

PRODUCTIVE    CO-OPERATION    OF    THE    THREE    FACTORS. 
THE  THREE  GREAT  PERIODS  OF  A  NATION'S  ECONOMY. 

The  relation  of  the  three  factors  to  one  another  is  necessari- 
ly very  different  in  different  branches  of  production.  For  in- 
stance, in  the  case  of  cattle-raising  on  a  prairie,  labor  does 
very  little,  land  almost  everything.  Hence  an  extensive,  thinly 
populated  country  is  best  adapted  to  this  species  of  produc- 
tion. But  where  land  is  scarce,  as  in  wealthy  and  populous 
cities,  human  activity  should  be  directed  into  those  branches 
of  industry  which  need  capital  and  labor,  as  manufactures  and 
the  trades.     (§  198.)  ^ 

Looked  at  from  this  point  of  view,  the  history  of  the  de- 
velopment of  the  public  economy  of  every  people  may  be 
divided  into  three  great  periods.  In  the  earliest  period,  nature 
is  the  element  that  predominates  everywhere.  The  woods, 
waters  and  meadows  afford  food  almost  spontaneously  to  a 
scanty  population.  This  is  the  Saturnian  or  golden  age  of 
which  the  sagas  tell.  Wealth,  properly  speaking,  does  not 
exist  here,  and  those  who  do  not  possess  a  piece  of  land  run 
the  risk  of  becoming  completely  dependent  on,  or  even  the 
slave  of  a  land  owner.  In  the  second  period,  that  through 
which  all  modern  nations  have  passed  since  the  later  part  of 
the  middle  ages,  the  element,  labor,  acquires  an  ever  increas- 
ing importance.  Labor  favors  the  origin  and  development  of 
cities  as  well  as  exclusive  rights,  the  rights  of  boroughs  and 
guilds  by  means  of  which  labor  is,  so  to  speak,  capitalized.    A 

*  It  is  not  to  be  overlooked  that  all  labor  expended  for  a  distant  end  also 
falls  vinder  the  head  of  capital.     See  Droz^  Economic  politique,  1S29, 1,  6. 

1  For  a  good  exposition  as  to  how  England  has  need  of  more  agi-icultural 
products,  the  East  Indies  of  more  capital,  and  the  West  Indies  of  more  labor, 
see  Fa-Mcett,  Manual  of  P.  E.,  1 10. 


IQQ  PRODUCTION  OF  GOODS.  [B.  I,  Cil.  II. 

middle  class  is  formed  intermediate  between  the  serfs  and  the 
owners  of  the  soil.  In  the  third  period,  capital,  if  we  may  so 
speak,  gives  tone  to  everything.  The  value  of  land  is  vastly 
increased  by  the  expenditure  of  capital  on  it,  and  in  manufac- 
tures, machine  labor  preponderates  over  the  labor  of  the  hu- 
man hand.^  The  national  w^ealth  undergoes  a  daily  increase; 
and  it  is  the  "  capitalism "  which  first  gives  an  independent 
existence  to  the  economic  activity  of  man;  just  in  the  same 
way  that  law  is,  as  it  were,  emancipated  from  land-own- 
ership, from  the  church  and  the  family  only  in  the  consti- 
tutional state  {Rechtsstaaf).^  But,  during  this  period,  the 
middle  class  with  its  moderate  ease  and  solid  culture  may  de- 
crease in  numbers,  and  colossal  wealth  be  confronted  with  the 
most  abject  miser3\*  Although  these  three  periods  may  be 
shown  to  exist  in  the  history  of  all  highly  civilized  countries, 
the  nations  of  antiquity,  relativel}^  speaking,  never  advanced 
far  beyond  the  second,  even  in  their  palmiest  days.  A  great 
part  of  that  which  is  accomplished  among  us  by  means  of  cap- 
ital and  of  machines,  the  Greeks  and  Romans  performed  by 
the  labor  of  slaves.  Leaving  Christianity  out  of  the  question, 
nearly  all  the  minor  differences  between  the  public  economy  of 
the  ancients  and  that  of  the  moderns  may  be  reduced  to  this 
fundamental  distinction.^  ^ 

°  It  is  a  very  significant  fact,  tliat,  at  present,  in  certain  European  countries, 
in  Germany  for  instance,  the  laborer  is  called  a  taker,  and  the  capitalist  a 
giver  of  work.  The  expressions  employed  by  Canard,  Say  and  Hermann, 
teach  a  similar  lesson. 

^  Schciffle,  Kapitalismus  und  Socialismus,  124  seq. 

■*  It  is  evident,  that,  absolutely  considered,  the  predominating  factor  of  an 
earlier  period  may  continue  to  increase  during  the  following :  and,  as  a  rule, 
it  does  continue  to  increase. 

^  I  need  cite  only  the  instance  of  the  slaves,  Avho  called  out  the  hours,  thus 
performing  the  functions  of  a  clock:  Martial,  Ylll.  6'j;  ^Kvcnal,  X.  216; 
Petron.  26;  of  the  turning  of  water  wheels,  in  Egypt  and  Babylon,  by  hu- 
man hands.  Strabo,  XVI.  738,  XVII.,  807.  Among  the  ancients,  it  re- 
quired one  shepherd,  and  shepherd  boys  besides,  to  take  care  of  twenty  sheep. 
(Geopon.  XVIII,  i.)  In  highly  cultivated  regions,  the  number  ran  up  to 
fifty.     (Demosth.,  adv.  Euerg.  et  Mnes.,   1155.)     It  seldom    passed    eighty 


Sec.  XLVIIL]  CRITICAL  HISTORY.  107 

SECTION  XLYIII. 

CRITICAL  HISTORY  OF  THE  IDEA  OF  PRODUCTIVENESS. 

In  this  chapter,  the  dogma-historical  (dogmcngcschichtUche) 
part  is  of  the  utmost  importance,  because  it  treats  of  the  con- 

(Varro^  De  re  rust.,  II.  lo,  lo.  2,  20),  or  one  hundred  (Caio,  R.  R.  c.  10); 
■while,  recently,  five  men  are  sufficient  to  take  care  of  eighteen  hundred  sheep. 
See  Rosckcr's  discourse  on  the  relation  of  Political  Economy  to  classical 
antiquity,  in  the  reports  of  the  Royal  Saxon  Science  Association,  May,  1S49. 
Also  D.  Ilujiie,  Discourses,  No.  10. 

^The  productive  power  of  each  of  the  factors  of  production  has  been  over- 
estimated by  some  schools.  After  Gratian  (c.  i,  C.  XIII.  qu.  1),  had  clearly 
recognized  the  necessary  cooperation  of  the  three  elements,  there  was  in  the 
one-sidedness  with  which  the  Reformers  emphasized  God's  blessing  as  the 
only  source  of  wealth,  a  great  over-estimation  of  the  factor  nature.  The 
Mercantile  System  over-estimated  the  factor  capital,  in  one  of  its  most  obvious 
component  parts,  money.  In  later  times  again :  "  La  terre  est  la  source  on 
la  viatiere  cVaii  V  on  tire  la  rickcssej  le  travail  de  Vhomme  est  la  forme  qui  la 
froduit.  Tons  Ics  homines  d'lin  dtat  subsistent  et  i enrichissent  aux  depens  dcs 
fropridtaires  des  terres.  (Cantillon,  Sur  la  Nature  du  Commerce,  i75S)  !•  33> 
55.)  La  terre  est  V  unique  source  des  richesses.  (^uesfiqy,  Maximes  gdnerales 
de  Gouvernement,  1758,  ch.  3.)  In  another  place,  indeed,  the  same  writer 
says:  les  revenus  sont  Ic  prodiiit  des  terres  et  dcs  hoinmes  (Grains^  p.  276, 
Daire),  and  Mirabeaii  frequently  laid  stress  on  the  necessary  cooperation  of 
labor  and  capital.  (Landwirthschaftsphilosophie,  translation  by  IVichmann, 
I,  5.)  Turgot^  Sur  la  Formation  et  Distribution  des  Richesses,  §  7.  For  an 
excellent  refutation  of  this  "  Physiocratic  "  one-sidedness,  which,  if  all  men 
are  endowed  by  nature  with  equal  rights,  leads  to  socialism,  see  Canard^ 
Principes,  6.  According  to  Gioja,  N.  Prospetto,  I.  35,  the  part  played  by  la- 
bor, in  the  production  of  Parmesan  cheese,  is  a  thousand  times  as  great  as 
that  played  by  the  soil;  and  in  the  production  of  a  Dutch  tulip,  a  hundred 
thousand  times  as  great.  The  English  are  wont,  similarly,  to  over-estimate 
the  relative  power  of  labor.  {Po7wcratie,  after  Ancillon,  Essais  philosoph- 
iques,  1817,  II.  327.)  "Commerce  and  trade  first  spring  from  the  labour  of 
men."  {North,  Discourses  upon  Trade,  112.)  Thus,  Locke  {i6cp),  Of  Civil 
Government,  II,  5,  40  ff.,  is  of  opinion,  that,  at  least  f"^  of  the  value  of  the 
products  of  the  soil,  useful  to  man,  are  to  be  ascribed  to  labor,  and,  in  the 
case  of  most,  even  ■^-^■^.  And  so,  Berkeley  (1735),  Querist,  No.  38  seq.  This 
view  is  advocated  in  its  boldest  form, —  a  thing  unusual  in  the  case  of  the 
independent  disciples  of  a  great  master  —  by  McCulloch,  Principles,  II,  ch.  i, 
that  it  is  to  labor,  and  to  labor  alone,  that  man  owes  everything  that  possesses 


168  PRODUCTION  OF  GOODS,  [B.  I,  Ch.  II. 

nection  between  the  deepest  fundamental  notions  and  the  prin- 
cipal branches  of  practical  life.  It  is  clear  that  eveiy  political 
economist  must  construct  his  exposition  of  productiveness  on 
his  prior  notions  of  goods  and  value.  We  must,  therefore, 
draw  a  distinction  between  expositions  which  are  logical  but 
altogether  too  narrow,  and  wholly  erroneous  ones.^ 

any  value  in  exchange.  Similarly,  y.  Mill,  Elements  (1S24),  III,  2.  The 
consequences  -which  socialism  might  drav  from  these  premises  are  £elf-evi- 
dent.  KarlAIarx's  whole  system,  for  instance,  i-ests,  without  any  attempt  at 
demonstration,  on  the  assumption  that  the  Ricardo  school  is  rrght.  Much 
more  moderate  views  are  met  with  earlier.  Thus,  Hobbes,  De  Give,  XIII, 
14,  and  Leviath.,  24  (1642  and  1651),  calls  labor  ei  farsimonia  necessary 
sources  of  wealth;  froventus  terrce  et  aquce  useful  ones;  and  Petty,  On 
Taxes  (1679),  47,  says:  "Labour  is  the  father  and  active  principle  of 
wealth,  as  lands  are  the  mother.  Land  and  labour  together  are  the  sources 
of  all  wealth ;  without  a  competency  of  lands  there  would  be  no  subsistence, 
and  but  a  very  poor  one  without  labour."  Harris,  Upon  Money  and  Goins, 
1757,  P.  I.  Adam  Smith,  also,  in  spite  of  the  well  known  passage  at  the  be- 
ginning of  his  Avork,  very  frequently  lays  stress  on  "the  annual  produce  of 
land  and  labour."  (See  the  passages  collected  in  Leser,  Begriff  des  Reich- 
thums  bei  A.  S.,  97.)  According  to  Leibniz,  regionis  fotentia  consistit  in  ter- 
ra, rebus,  Jiominibus.  (ed.  Dutens,  IV.  2,  531.)  Ricardds  school  is  wont  to 
bring  capital  under  the  head  of  labor,  as  saved-up  labor.  This  is  about  as 
correct  as  to  say,  that  all  that  a  grown  man  does,  his  parents  had  done. 
( Umpfenbach,  Nat.  CEk.,  64.)  There  is  only  one  way  in  which  labor,  and 
even  then  the  expression  is  not  exactly  correct,  can  be  looked  upon  as  the  only 
factor  in  production ;  and  that  is  to  presuppose  the  forces  of  nature  as  mat- 
ters of  course  (als  sich  von  selbst  verstehend),  and  to  call  the  aggregate  use 
made  of  them  by  the  human  mind,  labor.  Or  we  might  say  with  old 
EpicJiarmos,  that  the  gods  sell  all  goods  for  labor.  (Xenoph.,  Memor.  II.  i.) 
Moreover,  even  in  purely  intellectual  productions,  in  poetical  productions  for 
instance,  nature,  labor  and  experience,  the  culture  inherited  from  former 
ages  (a  kind  of  intellectual  capital)  uniformly  cooperate.  But  how  almost 
completely  valueless  in  literature  are  all  entirely  pure  (empty!)  productions 
of  the  fancy ! 

1  Before  the  predominance  of  the  Mercantile  System,  Mo7itchrHien  very 
cleverly  called  all  trades :  farcelles  ct  fragments  de  cctte  sagesse  divine  que 
Dieu  nous  communique  far  le  moyen  de  la  raisen.  By  means  of  the  three  es- 
tates ;  labourers,  artisans,  merckattds,  tout  etat  est  noiirri;  far  eux  tout  projii 
se  fait.  Vutilitd  regie  les  rangs  des  arts.  (Traite,  12,45,66.)  The  tQZ.(±.- 
ing  o{: P.  Gregorius  Tolosanos  (ph.  1597)  on  the  different  classes  of  society 
and  the  different  callings  of  men,  is  still  more  in  keeping  with  the  presentdoc- 


Sec.  XLVIII.]  CRITICAL  HISTORY.  169 

Thus,  the  Mercantile  System  admits  every  mode  of  ap- 
plying the  three  factors  of  production,  but  considers  them 
really  productive  only  in  so  far  as  they  increase  the  quantity 
of  the  precious  metals  possessed  by  the  nation,  either  through 
the  agency  of  mining  at  home,  or  b}^  means  of  foreign  trade. 
This  view  stands  and  falls  with  the  altogether  too  limited  idea 
of  national  wealth  before  mentioned  (§9),  which  this  system 
advocated.^  The  majority  of  the  followers  of  the  Mercantile 
System  ascribe  more  power  to  industry  to  attract  gold  and  sil- 
ver from  foreign  parts,  than  to  agriculture,  and  to  the  finer 
kinds  of  industiy  than  to  the  coarser;  to  active  and  direct 
trade",  more  than  to  passive  and  indirect  trade. 

trine  of  production;  only,  in  the  moralizing  tone  of  the  time,  he  speaks 
ratlier  of  tlieir  dignity  than  of  tlieir  influence  in  creating  wealth :  De  Rep.  I, 
195.     See,  also,  the  earlier  views  of  Franc.  Patricias  (ob.  1494),  De  Rep.  I, 

4,  7,  S. 

^  Compare  A.  Serra^  Breve  Trattato  delle  Cause  die  possono  far  abbondare 
i  Regni  d'  Ore  d'  Argento,  1613.  Th.  Man.,  England's  Treasure  by  foreign 
Trade,  1664.  Ch.  King^  British  INIerchant  or  Commerce  Preserved,  1721. 
But,  particularly,  A.  C.  Leib^  Von  Verbesserung  Land  und  Leuten  etc.  (1708), 
Avho,  from  the  point  of  view  of  the  Mercantile  Sj'stem,  draws  a  very  clear 
distinction  between  the  productive  and  unproductive  classes.  See,  also, 
infra,  §  116.  •  First  thoroughly  refuted  by  W.  Petty,  Political  Anatomy  of 
Ireland,  67,  82.  Quantulumcunque  concerning  Money  (1682).  D.  North, 
Discourses  upon  h-ade  (1691).  See  Roschcr''s  Geschichte  der  englischcn 
Volkswirthschaftslehre,  77,  88,  138.  And  later,  especially.  Ad.  Smith,  W. 
of  N.  IV.,  ch.  I  ft".  Adam  Smithes  doctrine  of  productive  and  unproductive 
labor  is  to  be  found  already,  in  this  period,  in  Petty,  Several  Essays,  127  If. 
Political  Anatom}',  185  fF;  also,  in  the  anonymous  work,  A  Discourse  of 
Trade,  Coyn  and  Paper  Credit,  London  (1697),  44,  159. 


170  PRODUCTION  OF  GOODS.  [B.  I,  Ch.  II. 


SECTION  XLIX. 

CRITICAL  HISTORY  OF  THE  IDEA  OF  PRODUCTIVENESS— 
THE  DOCTRINE  OF  THE  PHYSIOCRATES. 

The  doctrine  of  the  Physiocrates  is  to  be  explained  in  part 
by  a  very  natural  reaction  from  the  narrow-heartedness  of  the 
Mercantile  Sj^stem,  and  at  the  same  time,  by  a  presentiment, 
misunderstood,  of  the  true  theory  of  rent.  (§  150  ft'.).  Of 
the  six  classes  of  labor  mentioned  above  (§  38),  those  only  are 
called  productive  which  increase  the  quantity  of  raw  material 
useful  for  human  ends.  All  the  other  classes,  it  matters  not 
how  useful,  are  called  sterile,  salaried,  because  they  draw  their 
income  only  from  the  superabundance  of  land-owners  and  the 
workers  of  the  soil.  Tradesmen,  in  the  narrower  sense  of  the 
term,  produce  only  a  change  in  the  form  of  the  material,  the 
higher  value  of  which  depends  on  the  quantity  of  other  mate- 
rial consumed  for  the  purposes  of  the  tradesman's  labor.  If 
any  of  this  material  is  saved,  the  value  of  their  products 
sinks,  although  to  the  advantage  of  the  economy  of  the  whole 
nation.  In  any  case,  industry  could  create  no  wealth,  but  only 
make  existing  wealth  more  lasting.  It  might,  so  to  speak,  ac- 
cumulate the  value  of  the  quantity  of  food  consumed  during 
the  building  of  a  house  in  the  house  itself 

^ ^nesnay,  Dialogue  sur  les  Travaux  des  Artisans,  210  ft";  S89  ed  Daire; 
Turgot,  Sur  la  Formation  etc.,  §  8;  Dtcpont',  Correspondence  avec  J.  B.  Say, 
400,  ed.  Daire.  B.  Franklin^  Letter  to  Dr.  Evans  (1768),  and  Positions  Con- 
cerning National  Wealth  (1769),  Works  ed.  Sparks,  VII  and  II.  Similarlj 
even  Aristotle^  Oec,  I,  2,  says,  that  commerce,  wage-labor  and  war  win  from 
men,  with  or  without  their  will ;  but  that  only  agriculture  obtains  booty  fro:n 
nature.  And  so  Cicero  says  of  merchants :  nihil  projiciunt,  nisi  admodum 
mentiantur.  De  Off.,  I,  42.  The  same  view  seems  to  have  prevailed  during 
the  middle  ages.  See  Thotn.  Aquin.,  De  Rebus  publicis,  II,  3,  5  seq.  Luther 
entertained  a  like  notion  (Vom  Kaufhandel  und  Wucher,  1524),  He  prefers 
agriculture  to  the  trades.  Seethe  Irmischer edition  of  his  works,  XXII,  284; 
XXXVI,  172;  LXI,  352.  C<2/w«  considered  commerce  both  useful  and  hon- 
orable ;  so  that  ex  ipsius  mercatoris  diligentia  atque  indiistria,  its  profit  may  be 
greater  than  that  of  agi-iculture.     (0pp.  ed.  Amstelod,  1664,  IX,  223.)    Asgill, 


Sec.  XLIX.]  CRITICAL  HISTORY.  171 

But  if  tradesmen  really  earned,  in  the  value  of  their  pro- 
ducts, only  what  they  had  consumed  during  their  labor,  it  would 
be  difficult  for  them  to  find  employers  to  provide  them  with 
capital.  Everyone  will  acknowledge,  that  a  Thorwaldsen  and 
an  ordinary  stone-cutter,  with  the  same  block  of  marble,  the 
same  implements,  the  same  food,  would  necessarily,  after  the 
same  time,  turn  out  exceedingly  different  values.^  And,  even 
in  the  case  that  industry  should  add  to  the  raw^  material  only 
precisely  the  same  amount  of  value  as  had  been  consumed  by 
the  workmen,  can  it  be  said  that  the  work  ceases  to  be  pro- 
ductive simpl}"  because  it  is  consumed  by  the  Avorkmen  them- 
selves? If  that  were  so,  agriculture  even,  would,  in  most 
countries  with  a  low  civilization,  be  unproductive.^ 

Commerce,  according  to  the  theory  of  the  Physiocrates, 
only  transfers  already  existing  wealth  from  one  hand  to  an- 
other. What  the  merchants  gain  by  it  is  at  the  cost  of 
the  nation.     Hence,  it  is  desirable  that  this  loss  should  be  as 

Several  Assertions  proved  in  order  to  create  another  Species  of  Money  than 
Gold  (1691):  "what  we  call  commodities  is  nothing  but  land  severed  from 
the  soil ;  man  deals  in  nothing  but  earth."  Concerning  Cantillou.,  compare 
§  47,  note  4.  How  violent  an  innovation  the  Physiocratic  theory  was  in  its 
time  may  be  inferred  from  what  Zincke  writes  in  the  Leipzig  Sammlungen, 
X,  551  ff.  (1753),  p.  20,  XIII,  S61. 

^  ^ncsnay,  1.  c,  1S9,  does  not  ignore  that  many  workmen  earn  more  than 
the  cost  of  their  necessary  subsistence;  but  he  claimed  that  this  was  a  result 
of  a  natural  or  legal  monopoly  of  the  same.  The  dearer  labor  was,  the  more 
productive  it  seemed.  Per  contra,  see  Dohm  on  the  Physiocratic  system,  in 
the  Deutsch.  Museum,  177S,  II,  313  ff. 

2  Gournay  (comi^are  Turgot^  Eloge  de  G.,  in  Guillaumin's  edition,  I,  266, 
271  if.),  as  well  as  Raynal^  Histoire  des  Indes,  vol.  X,  Livre  19,  spite  of  the 
similarity  of  their  and  Quesnay's  views,  acknowledged  on  this  account,  the 
productiveness  of  industry.  For  some  remarkable  examples  illustrative  of 
how  it  may  increase  the  value  in  exchange  of  raw  material,  see  the  anony- 
mous work.  Paying  Old  Debts  without  New  Taxes,  London,  1723.  See  also 
Algaroiti  (ph.  1794),  318,  in  0«/(P^/,  Economisti  classic!  italiani,  Parte  moder- 
na,  I.  Thus  a  cwt.  of  coarse  cast  iron  is  converted,  in  a  Berlin  manufactory, 
into  88,440  shirt  buttons  worth  6^^  silver  groschens  each.  Hence  the  value  is 
raised  from  1-2  thalers  to  19,653  thalers.  The  increase  of  the  value  in  use 
by  industrial  labor  is  self-evident. 


172  PRODUCTION  OF  GOODS.  [B.  I,  Ch.  II. 

small  as  possible.  Hence  sterility!^  But,  the  more  important 
branches  of  business,  especially  wholesale  trade,  are  connected 
with  a  transportation  of  goods  (  Verri),  either  from  one  place 
or  from  one  period  of  time,  into  another.  Here  the  genuine 
merchant  speculates  essentially  on  the  difference  of  the  values 
in  use  which  are  afterwards  greater  than  before.^  The  ice 
shipped  yearly  from  Boston  to  tropical  lands  met  a  much 
more  urgent  and  wide-spread  want  there  than  it  would  if  it 
had  remained  at  home.  And  thus  the  storage  of  grain  in 
large  quantities  after  a  bountiful  harvest  withdraws,  indeed, 
an  object  of  enjoyment  from  the  comsumption  of  the  people ; 
but  its  sale,  after  a  bad  harvest,  undoubtedly  increases  their 
enjoyment  in  a  much  greater  degree  than  it  was  before  dimin- 
ished. Besides,  the  condition  of  both  parties  to  the  contract 
is  usually  improved  in  all  normal  trade.  {Condillac.y  No  one 
parts  with  exchangeable  goods  unless  they  are  of  less  use  to 
him  than  the  ones  he  receives  in  return."^  And  so,  the  value  in 
use  of  a  nation's  resources  is  really  increased  by  commerce.  To 
the  other  attributes  of  goods  it  adds  one  of  the  principal  condi- 
tions of  all  use,  accessibility  {Ktidler),  with  which  it  either 
newly  endows  them,  or  which  it  increases  in  degree.  To  this 
end,  the  merchant  makes  use  of  tools,  just  as  the  manufacturer 

^ ^testiay,  Dialogue  surle  Commerce. 

^  Recognized  very  early  by  Ad.  Contzen,  Politicorum,  Lib.  VIII,  C.  lo 
(i629)._ 

^This  did  not  escape  the  notice  of  Frederick  II.  Von  Raumer,  Hohenstau- 
fen,  III,  535.. 

"  Condillac  acknowledges  the  productive  power  both  of  industry  and  of 
commerce ;  and  that  the  service  rendered  by  the  state  is  at  least  economically 
indispensable.  (Le  Commerce  et  le  Gouvernment,  1776, 1, 6,  7,  10.)  Beccaria, 
Economia  pubblica  (1769  ff.),  IV,  4,  24.  Boisgtnllchert  (ob.  1714),  Sur  la  Nature 
des  Richesses,  illustrated  the  utility  of  commerce  by  the  picture  of  a  number 
of  men  bound  to  pillars,  one  hundred  steps  apart,  one  with  a  superabundance 
of  food  but  naked,  a  second  with  a  superabundance  of  fuel,  a  third  with  a 
superabundance  of  clothing  etc. ;  all  of  whom  perish,  because  unable  to  ex- 
change their  respective  surpluses  with  one  another.  According  to  Lotz^  Re- 
vision, I,  217,  "buying  dear,"  apart  from  real  fraud,  means  only  a  decrease  of 
possibCe  gain. 


Sec.  L.]  critical  HISTORY.  173 

does.  What  spinning-wheels,  looms  and  workshops  are  to  the 
latter,  ships,  warehouses,  cranes  etc.,  are  to  the  former.  If 
production  be  not  complete  until  the  thing  produced  is  made 
fit  for  its  last  end,  consumption,  commerce  may  be  looked  up- 
on as  the  last  link  in  the  chain  of  productive  labor.  It,  at  the 
same  time,  constitutes  a  series  of  intermediate  links ;  as  with- 
out it  no  division  of  labor  is  possible,  and  without  a  division 
of  labor,  no  higher  economic  productiveness.^  How  com- 
merce may  increase  the  value  in  exchange  of  goods,  and  with- 
out in  any  way  injuring  the  purchaser,  needs  no  further  illus- 
tration.^ 

SECTION  L. 

THE  SAME  SUBJECT  CONTINUED. 

Even  Adam  Smith  called  services,  in  the  narrower  sense  of 
the  term  (§  3),  the  grave  and  important  ones  of  the  statesman, 
clergyman  and  physician,  as  well  as  the  "  frivolous  "  ones  of 
the  opera  singer,  ballet-dancer  and  buffoon,  unproductive. 
The  labor  of  none  of  these  can  be  fixed  or  incorporated  in  any 

^Verri,  Meditazioni,  XXIV,  instead  of  calling  the  merchant  productive, 
calls  him  a  mediator  between  producers  and  consumers.  It  would  be  just 
as  reasonable  to  call  the  shoemaker  a  mediator  between  the  production  and 
consumption  of  leather;  or  the  cloth  merchant,  who  cuts  the  material  froin 
the  piece,  an  assistant  preparatory  to  the  tailor.  The  labor  of  commerce  is 
especially  like  that  of  the  fisherman  or  the  turf  digger,  because  they  produce 
only  in  so  far  as  they  transfer  goods  from  inaccessible  to  accessible  places. 
See,  however.  Ran,  Lehrbuch,  I,  §  103.  See  the  demonstration  of  the  pro- 
ductive power  of  commerce  in  general,  as  well  as  of  what  is,  by  way  of  pref- 
erence, called  industry,  in  Ad.  SmitJi,  W.  of  N.,  IV,  ch.  9.  A  much  more 
fundamental  refutation  of  the  Physiocratic  Principle  is  to  be  found  in  Jacob^ 
N.  CEk.,  204  flf. 

9  In  1S43,  about  55,000  tons  of  ice  were  shipped  from  Boston.  Less  than 
25  cents,  per  ton  was  paid  for  the  ice  in  the  first  instance.  When  packed  on 
board  ship,  it  was  worth  $2.55  per  ton.  The  ultimate  sale  brought  $3,575,- 
000.  Ausland,  1S44,  No.  27S.  The  ancients  were  acquainted  with  a  similar 
production  of  ice,  the  value  in  exchange  of  which  might  be  almost  entirely 
reduced  to  the  labor  of  commerce.  See  AV/^(7///.,  Memor.,  II,  1,30;  Athen. 
Ill,  97;  Proverbs  of  Solomon,  25,  13. 


174:  PRODUCTION  OF  GOODS.  [B.  I,  Ch.  II. 

particular  object.  ^  ^  But  how  strange  it  is  that  the  labor  of 
a  violin-maker  is  called  productive,  while  that  of  the  violin- 
player  is  called  unproductive;  altliough  the  product  of  the 
former  has  no  other  object  than  to  be  played  on  by  the  latter? 
{Garnicr.)  Is  it  not  strange  that  the  hog-raiser  should  be 
called  productive,  and  the  educator  of  man  unproductive 
{List);  the  apothecary,  who  prepares  a  salve  which  alleviates 
for  the  moment,  productive,  the  physician,  unproductive,  spite 
of  the  fact  that  his  prescription  in  relation  to  diet,  or  his  surgi- 
cal operation,  may  radically  cure  the  severest  disease? 

If  the  productiveness  of  an  employment  of  the  factors  of 
production  be  made  to  depend  on  whether  it  is  attended  by  a 
material  result,  no  one  will  deny  that  the  labor  of  the  plow- 
man, for  instance,  is  productive ;  and  no  one,  of  Adam  Smith's 
school,  at  least,  that  that  of  the  clerk,  who  orders  the  raw 
material  for  the  owner  of  the  manufactory,  is.  They  have 
participated  indirectly  in  the  production.  But,  has  not  the 
servant  of  the  state,  who  protects  the  property  of  its  citizens, 
or  the  physician,  who  preserves  the  health  of  the  producer,  an 
equally  mediate  but  indispensable  share  in  it?  The  field- 
guard  who  keeps  the  crows  away,  every  one  calls  productive ; 
why,  not,  then,  the   soldier,  who  keeps  away  a  far  worse 

'  W.  of  N.,  ch.  3.  See,  however,  Gartner's  French  translation  of  Ad. 
Smith,  Pr^f.  p.  IX  and  V,  note  20.  Similar!}^,  MaUJius,  Principles,  ch.  i, 
Lect.  21.     Definitions,  ch.  7,  10. 

"^ Bacon  had  already  said  of  the  nobility,  clergy  and  literateurs :  sor/z' m- 
fiiblicce  nihil  addtint  (Serm.,  15,  29);  in  opposition  to  which,  Hobbes  justly  re- 
marks, that  even  human  labor  may,  like  other  things,  be  exchanged  against 
goods  of  all  sorts.  (Leviathan,  24.)  In  the  work,  Discourse  of  Trade,  Coyn 
and  Credit,  p.  44  flf.,  and  p.  156,  the  absolute  necessity  of  "head-work"  as 
well  as  bodily  labor,  is  conceded ;  but  it  is  insisted  that  physicians,  clergymen 
and  jurists  can  never  enrich  a  country,  and  that  a  relatively  large  number  of 
them  would  even  conduce  to  national  poverty.  (See  Rosc/icr,  Geschichte  der 
englischen  Volkswirthschaftslehre,  138.)  David  Hume  considers  merchants 
as  productive,  but  says  that  a  doctor  or  lawyer  can  grow  rich  only  at  the  ex- 
pense of  some  one  else.  (Discourses,  No.  4,  On  Interest.)  Ferguson  very 
cleverly  compares  such  a  valuation  of  national  wealth  to  that  of  a  miser. 
Hist,  of  Civil  Society,  VI.  I. 


Sec.  L.]  critical  HISTORY.  175 

enemy  from  the  whole  land?  {JMcCiilIocJi^  But  the  entire 
division  of  business  into  two  branches,  the  one  directly,  and 
the  other  indirectly  productive,  can  be  defended  only  as  re- 
spects certain  kinds  of  goods.  {Sckniitthcnncr^  The  labor  of 
the  judge,  for  instance,  is  only  indirectly  productive  in  the 
manufacture  of  shoes,  inasmuch  as  he  guarantees  the  payment 
of  the  shoemaker's  account.  On  the  other  hand,  the  shoe- 
maker contributes  only  very  indirectly  to  the  general  security 
which  the  law  affords,  by  protecting  the  judge's  foot.^ 

Nor  can  any  effectual  inferiority  of  service  be  claimed, 
simply  because  the  productive  power  of  one  branch  of  busi- 
ness is,  measured  by  the  duration  of  its  results,  greater  than 
another.*  What  is  more  perishable  than  a  loaf  of  bread 
bought  for  dinner?  What  more  imperishable  than  the  mon- 
luncntiim  mx  pcrcmiius  of  a  Horace  ?  The  labor  expended  on 
persons  and  on  relations  (  Verhaltnisseti)  is,  both  as  to  the  ex- 

3  Similarly  Lauderdale,  Inquiry,  355;  Z,o/^,  Handbuch  der  Staatswirth- 
schaft,  I,  §  39,  and  Ran,  Lehrbuch  I,  §  195,  concede  only  indirect  productive- 
ness to  commerce.  It  may  be  shown,  in  a  great  many  instances,  that  such 
productiveness  exists  side^by  side  with  direct  productiveness,  on  account  of 
the  thousand  ways  in  which  all  economic  threads  are  interwoven  with  one 
another.  Thus  Paley  remarks  in  his  work  on  the  Principles  of  Morals  and 
Politics,  that  a  tobacco  manufacturer  even  may  contribute  indirectly  to  the 
cultivation  of  grain ;  an  actor,  to  industry  etc. 

•*Thus  Sismondi,  Nouveaux  Principes,  II,  ch.  i,  and,  earlier,  Mcngotti  Col- 
bertismo,  317.  (Cust.)  See,  on  the  other  hand,  Hermann,  Staatsw.  Unter- 
suchungen,  34  ft'.  Even  J.  B.  Say  does  no  manner  of  justice,  in  this  respect, 
to  personal  services.  He  speaks  oi produits  qui  ne  s'attachent  d,  rien  qui  s'dvan- 
ouissent  cb  mdsure  qiCils  naisscnt,  qu'il  est  impossible  d'accuinuler,  qui  ri'ajoutent 
rei7i  ci  la  richesse  nationalc.  Compare  Catechisme  (3d  ed.)  52  ff.,  174  ft". 
On  the  other  hand  Dunoyer,  Libert^  du  Travail,  L.  V.,  remarks  that 
here  labor  and  its  result  are  made  to  change  places;  the  former  like  all  labor 
is  very  perishable,  the  latter  as  lasting  as  in  the  case  of  other  kinds  of  labor. 
In  the  one  case  the  utility  is  fixed  in  things,  in  the  other  in  persons.  Ad. 
MUller,  Elemente  der  Staatskunst  passim,  calls  special  attention  to  how  the 
kinds  of  labor,  called  unproductive  by  Adam  Smii/i,  preserve  the  state,  and 
in  that  way,  all  individual  exchangeable  goods.  Similarly,  Storch,  Handbuch, 
I,  347 ;  Steinleiu,  Handbuch,  I,  460.  Lauderdale  (443),  however,  is  correct 
when  he  says,  that  the  continued  duration  of  the  product  of  labor  depends, 
usually,  more  on  the  caprice  of  consumers  than  on  the  nature  of  the  labor. 


17G  PRODUCTION  OF  GOODS.  [B.  I,  Ch.  II 

tent  and  duration  of  its  results,  much  less  capable  of  being 
estimated  than  any  other;  but  its  capacity  of  accumulation 
and  its  power  of  propagation  are  greater  than  any  other.  It 
is  in  the  domain  of  the  "'immaterial,"  that  man  is  most  "cre- 
ative." {Lticdcr.)  ^  Finally,  neither  should  the  greater  indis- 
pensablenss  of  the  more  material  branches  of  business  be  too 
generally  asserted.  Agriculture  produces  grain  which  is  in- 
dispensable, and  tobacco  which  is  not; industry,  cloth,  as  well  as 
lace;  commerce  draws  from  the  same  part  of  the  world  rhu- 
barb and  edible  bird's-nests ;  and  so,  to  services  belong  the  in- 
dispensable ones  of  the  educator  and  judge,  as  well  as  those 
of  the  rope-dancer  and  bear-leader,  which  can  be  dispensed 
wath.®  Indeed,  the  dividing  line  between  material  and  intel- 
lectual production  cannot,  by  any  means,  be  closely  drawn.' 

SECTION  LI. 

•       THE  SAME  SUBJECT  CONTINUED. 

The  greater  number  of  recent  writers^  have,  therefore,  come 
to  be  of  the  opinion  that  every  useful  business  which  minis- 

5  Gamier  calls  attention  to  the  fact,  that  there  is  a  great  quantity  of  mate- 
rial products,  such  as  laces,  perfumes  etc.,  that  can  scarcely  be  ever  used  in 
further  production,  and,  generally  speaking,  one's  resources  for  the  most  part 
are  not  kept  in  lasting  goods,  but  are  preserved  by  the  change  of  technic  forms 
in  production.     Hermann,!,  Aufli.,  115. 

f  When  ScJion,  Nat.  ffikonomie,  33,  ridicules  the  idea  of  the  productive- 
ness of  personal  services,  by  citing  the  instance  of  prostitution  carried  on  as 
a  trade,  he  forgets  that  many  material  goods  also  may  conduce  to  the  moral 
damage  of  the  purchaser  of  them.  It  is  said  that  there  are  in  France  3,500 
retailers  and  colporteurs  of  immoral  Avritings  and  pictures,  who  sell  yearly 
nine  million  numbers  or  pieces,  at  a  cost  of  six  million  francs !  (Moniteur,  9 
Avril,  1S53.) 

'  Compare  Schafflc,  Theorie  der  ausschliessenden  Absatzverhaltnise,  1867, 

135.  seq. 

1  Many  of  the  socialists  take  a  retrograde  step  in  this  respect,  in  as  much 
as  they  consider  only  manual  labor  productive.  Fourier's  school  particu- 
larly, declaim  passionately  against  the  unproductiveness  of  commerce  and 
of  most  personal  services.  Compare  V.  Considdrant,  Destin^e  sociale,  1S51, 
1,44. 


Sec.  LL]  CRITICAL  HISTORY.  177 

ters  to  the  whole  people's  requirement  of  external  goods  pos- 
sesses economic  productiveness.^  But  it  makes  a  great  dit- 
ference  to  science,  whether  a  view  is  considered  true  because 
no  one  has  suggested  a  doubt  of  its  correctness,  or  because 
all  doubts  as  to  its  truth  have  been  triumphantly  removed. 

'  Besides  the  above,  see  Gioja,  N.  Prospetto,  I,  246  ff. ;  Scialoja,  42 ;  y.  B. 
Say,  Traite,  I,  ch.  2;  Huf eland,  N.  Grundlegung,  I,  42,  54;  Gr.  Sodcn,  Nat. 
GEkonomie,  I,  142  ff.  Hermann,  St.  Untersuchungen,  20  ft",  distinguishes 
three  politico-economical  points  of  view;  that  of  the  producer,  that  of  the 
consumer,  and  that  of  the  whole  nation's  economy.  The  producer  calls  his 
labor  productive,  in  case  he  receives  back  his  outlay  of  capital  with  the  rate 
of  profit  usual  in  the  trade  of  the  country.  To  this  point  of  view,  there- 
fore, every  service  which  is  paid  for,  according  to  wish,  seems  productive. 
On  the  other  hand,  the  consumer  ascribes  productiveness  to  all  those  kinds 
of  labor  the  achievements  of  which  he  may  use,  and  which  he  can  obtain  at 
a  convenient  price.  Whenever,  therefore,  he  pays  for  a  service  voluntarily, 
he  acknowledges  its  productiveness.  Lastly,  from  a  national-economical 
point  of  view,  all  labor  is  considered  productive  which  increases  the  quan- 
tity of  goods  exposed  for  sale  in  the  market;  and  this,  personal  services  do. 
The  technic  productiveness,  which  depends  on  the  execution  of  the  technic 
ideas  floating  before  the  mind  of  the  workman,  must  be  distinguished  from  this 
economic  productiveness.  It  is  possible  that,  technically  labor  may  be  very 
productive,  and  yet  cause  economic  loss;  for  instance,  the  fine  arts  and  the 
so-called  master  pieces  of  the  trades!  See  Seneca,  De  Benef,  II,  33.  H. 
(33)  furnishes  a  very  good  refutation  of  the  doctrine  that  a  great  deal  depends 
on  whether  the  labor  has  been  paid  from  capital  or  from  income.  Eiselen, 
Volkswirthschaft  (1843),  27  ff,  remarks,  that  the  laborer,  for  instance,  who 
grows  corn,  must  besides  look  after  his  health  and  the  preservation  of  his 
house;  this  is  a  part  of  his  necessary  aggregate  labor.  "Why,  then,  should 
it  be  called  unproductive  when  such  secondary  labor  is  performed  by  particu- 
lar persons.''  Otherwise  the  farmer  would  have  no  time  whatever  for  his 
principal  business!  Edinburg  Review,  1S04,  IV,  343  ff.;  Wakefield,  An 
Essay  upon  Political  Economy,  1804,  who  is  concerned  mainly  with  the 
theory  of  the  productiveness  of  labor.  L.  Lauderdale  says,  that  when  the 
nation's  wealth  is  estimated  according  to  its  value  in  use,  all  useful  labor  is 
productive ;  and  that  when  estimated  according  to  its  value  in  exchange,  all 
labor  that  is  paid  is  productive.  (Inquiry,  ch.  3.)  Stein  (Lehrbuch,  68; 
Tiib.  Zeitschr.,  iS68,  230)  conditions  the  notion  of  productiveness  by  the 
presence  of  a  superfluity  of  values.  But,  it  may  be  asked,  does  a  family, 
which  does  no  more  than  support  itself,  labor  unproductively .?  (Compare, 
however,  §  30.)  J.  S.  Mill  took  a  surprisingly  retrograde  step  in  the  doc- 
trine on  this  point,  in  his  Principles,  I,  ch.  3.  Compare  his  Essays  on  some 
Vol.  I.  — 12 


178  PRODUCTION  OF  GOODS.  [B.  I,  Ch.  II 

SECTION  LII. 

IDEA  OF  PRODUCTIVENESS. 

It  should  never  be  lost  sight  of,  that  the  public  economy  of 
a  people  should  be  considei-ed  an  organism,  which,  when  its 
growth  is  healthy,  always  develops  more  varied  organs,  but 
always  in  a  due  proportion,  which  are  not  only  carried  by  the 
body,  but  also  in  turn  serve  to  carry  it.  The  aggregate  of 
the  wants  of  the  entire  public  economy  etc.,  is  satisfied  by  the 
aggregate  activity  of  the  people.  Every  individual  who  em- 
ploys his  lands,  labor  or  capital  for  the  whole,  receives  his 
share  of  the  aggregate  produce,  whether  he  contributed  or 
not  to  the  creation  of  the  kind  of  produce  in  which  he  is  paid. 
Thus,  in  a  pin-manufactory,  the  workman  who  is  occupied 
solely  in  making  the  heads  of  pins  is  not  paid  in  pins  or  pin- 
heads,  but  in  a  part  of  the  aggregate  result  of  the  manufac- 
ture, in  money.  Every  department  of  business,  therefore, 
for  the  achievements  of  which  there  is  a  rational  demand,  and 
which  are  remunerated  in  proportion  to  their  deserts,  has 
labored  productively.  It  is  unproductive  only  when  no  one 
will  need  what  it  has  brought  forth,  or  when  no  one  will  pay 
for  it;  but,  in  this  case,  what  is  true  of  the  writer  without 
readers  —  that  he  is  unproductive  —  and  of  the  singer  with- 
out hearers,  is  equally  true  of  the  peasant  whose  corn  rots  in 
his  granary,  because  he  can  find  no  sale  for  it.^ 

unsettled  Questions  of  Political  Economy,  No.  3.  A  still  more  surprising 
exaggeration  in  de  Augustinis  Instituzzioni  di  Economia  sociale  (Napolii  S37), 
ivho  goes  so  far  as  to  call  a  person  guilty  of  arson  a  productive  person  be- 
cause he  has  produced  for  himself  "  the  pleasure  of  destruction  " !  More 
recently,  von  Mangoldt  distinguishes  between  economic  labor  and  the  labor 
of  culture :  the  latter  is  incorporated  into  the  man  himself,  the  former  one 
employed  on  the  external  world,  in  order  to  transform  it  in  a  way  corres- 
ponding to  human  wants.  Viewed  from  the  stand-point  of  Political  Econ- 
omy, the  latter  only  is  productive.     (Volkswirthschaftslehre,  1S65,  26  ff.) 

'  We  might,  indeed,  compare  original  production,  that  which  preceded  all 
other,  to  eating;  the  trades,  to  digestion;  commerce,  to  the  movements  of  the 


Sec.  LIII.]  CRITICAL  HISTORY  179 

SECTION  LIII. 

THE  SAME  SUBJECT  CONTINUED. 

In  this  matter,  again,  there  is  an  important  difference  to  be 
observed  between  private  or  individual  economy  and  econ- 
omy in  its  widest  sense,  in  the  sense  of  a  world-economy.  The 
productiveness  of  labor  is  estimated  in  the  case  of  the  for- 
mer, according  to  the  value  in  "exchange  of  its  result;  in  the 
case  of  the  latter,  according  to  its  value  in  use.  There  is  a 
great  number  of  employments  which  are  very  remunerative 
to  private  individuals,  but  which  are  entirely  unproductive, 
and  even  injurious,  so  far  as  mankind  is  concerned;  for  the 
reason  that  they  take  from  others  as  much  as,  or  even  more 
than  they  procure  to  those  engaged  in  them.  Here  belong, 
besides  formal  crimes  against  property,  games  of  chance,^ 
usurious  speculations  (§113)  and  measures  taken  to  entice  cus- 
tomers away  from  other  competitors.  Again,  scientific  ex- 
periments, means  of  communication  etc.,  may  be  entirely  un- 
productive in  the  individual  economy  of  the  undertaker,  and 
yet  be  of  more  profit  to  mankind  in  general,  than  they  have 

several  members  of  the  body;  personal  services  to  inspiration,  and  yet 
all  are  equally  necessary  to  the  hfe  of  the  body!  Thus,  GajniUi  com- 
pares agriculture  to  the  root  of  a  tree  of  which  the  service  rendered  by 
the  state  is  the  top.  The  growth  of  tlie  latter  conti'ibutes,  as  well  as 
that  of  the  former,  to  the  nutrition  of  the  ^J.•hole,  and  is  far  removed 
from  exhausting  the  tree.  Theorie  de  1'  E.  P.,  II,  46  if.  '^Natural  pro- 
duction" would,  indeed,  accomplish  very  little  without  the  legal  protec- 
tion guarantied  by  the  state,  or  witliout  the  tools  furnished  by  industry 
etc.  But  it  is,  besides,  in  most  instances,  a  distortion  of  the  truth  to 
speak  ot  productive  and  unproductive  men  or  classes  of  men.  These 
expressions  are  proper  only  when  applied  to  individual  kinds  of 
labor.  See  Murkard^  Ideen  iiber  Nat.  CEk.,  SS  ft'.  Persons  seriously  ill 
are  temporarily  unproductive,  and  children  who  die  early,  are  unproductive 
for  their  Avhole  life. 

1  Not,  however,  in  the  case  in  which  the  loser  estimates  the  pleasure  of  the 
play  higher  than  the  loss. 


ISO  PRODUDTION  OF  GOODS.  [B.  1,  Ch.  II. 

cost  the  former.^  In  this  respect  the  nation's  economy  holds 
a  middle  place  between  individual  economy  and  the  world's 
economy.^  Strictly  speaking,  only  those  employments  should 
be  called  productive  which  increase  the  world's  resources. 
Hence,  the  work  of  government  should  be  called  so,  only  in 
so  far  as  its  expenses  are  covered  by  the  taxes  paid  willingly 
by  the  more  reasonable  portion  of  the  citizens ;  and  also  only 
in  so  far  as  its  work  is  really  necessary  to  the  attainment  of 
its  end.'*  The  productiveness  of  an  employment  supposes, 
also,  that  it  is  not  carried  on  at  the  cost  of  other  employments 
which  it  is  more  difficult  to  do  without.  In  a  healthy  nation 
we  may,  in  this  matter,  rely,  to  a  certain  extent,  on  the  judg- 
ment of  public  opinion,  which  knows  how  to  appreciate,  at 
their  just  value,  professional  gamblers,  pettifoggers  and  the 
luxury  of  soldiers.  The  greater,  freer  and  more  cultivated  a 
nation  is,  the  more  probable  is  it  that  the  productiveness  of 
private  economy  is  also  national-economical  productiveness, 
and  that  national-economical  productiveness  is  world-econom- 
ical productiveness.^ 

SECTION  LIV. 

IMPORTANCE  OF  A  DUE  PROPORTION  IN  THE  DIFFERENT 
BRANCHES  OF  PRODUCTIVENESS. 

Much  always  depends  on  the  due  proportion  of  the  differ- 
ent branches  of  productiveness  to  one  another.  Thus,  Spain, 
for  instance,  has  remained  poor  under  the  most  advantageous 

2  y.  B.  Say,  Traite,  I.  ch.  i. 

^v.  Cancrin,  CEkonomie  der  menschlichen  Gesellschaften,  1S45,  10,  speaks, 
in  this  case,  of  privative  production.  Among  the  Socialists,  Bazard's  ex- 
pression V exploitation  de  Vkomine  far  Vhovime,  has  found  loud  echo;  instead 
of  which  only  V exploitation  du  globe  far  Vhoinme  should  be  allowed  to  obtain. 
(Exposition  de  la  Doctrine  de  St.  Simon,  24.)  But  von  Schroder  had  already- 
warned  the  world  of  "  imagined  food  "  which  led  only  to  idleness.  (F.  Schatz- 
und  Rentkammer,  191,  363.) 

■»  Therefore,  there  should  not  be  too  many  nor  too  highly  salaried  offices. 
See  Storch,  Nationaleinkommen,  33  ff. 

5  See  V.  Mangoldt,  Volkswirthschaftslehre,  29  ff. 


Sec.  LIV.J  DUE  PROPORTION.  181 

circumstances  in  the  world,^  because  it  allowed  a  dispropor- 
tionate preponderance  of  personal  services.  The  character  of 
the  Spanish  people  has  always  given  them  a  leaning  towards 
aristocratic  pride  and  economic  idleness.  Tradesmen,  in  that 
country,  sought,  as  a  rule,  to  amass  merely  enough  to  enable 
them  to  live  on  the  interest  of  their  capital;  after  which  they, 
by  way  of  preference,  removed  it  into  some  other  province, 
where  they  might  be  considered  as  among  the  nobility;  or 
they  withdrew  into  a  monastery.  Even  in  1781,  the  Madrid 
Academy  thought  it  incumbent  on  it  to  propose  a  prize  for  the 
best  essay  in  support  of  the  thesis :  "  The  useful  trades  in  no 
w^ay  detract  from  personal  honor."  ^  During  the  century  in 
which  the  country  was  in  its  greatest  glory,  the  whole  people 
were  bent  on  being  to  all  Europe  what  nobles,  officers  and  offi- 
cials are  to  a  single  nation.  "  Whoever  wishes  to  make  his 
fortune,"  said  Cervantes,  "  let  him  seek  the  church,  the  sea  (i.  e., 
go  as  an  adventurer  to  America)  or  the  king's  palace."  Un- 
der Philip  III.,  there  were  in  Spain  nine  hundred  and  eighty- 
eight  nunneries,  and  thirty-two  thousand  mendicant  friars. 
The  number  of  monasteries  trebled  between  1574  and  1624, 
and  the  number  of  monks  increased  in  a  yet  greater  ratio.  A 
great  many  of  its  manufactories,  much  of  its  commerce,  and  not 
a  few  of  its  most  important  farms  were  controlled  by  foreign- 
ers, especially  by  Italians.  There  were,  it  seems,  in  1610,  one 
hundred  and  sixty  thousand  foreign  tradesmen  living  in  Cas- 
tile. In  1787,  there  were  still  188,625  priests,  monks,  nuns, 
etc.;  280,092  servants;  480,589  nobles;  964,571  day  labor- 
ers; 987,187  peasants;  310,739  mechanics  and  manufacturers; 

*  Remained,  and  not  become,  poor,  as  is  generally  supposed ;  for  the  enorm- 
ous wealth  of  Spain,  under  Ferdinand  and  Isabella,  as  well  as  during  the 
early  period  of  Charles  V.  is  only  a.  fable  convcnue.  Charles  V.  said :  France 
has  a  superabundance  of  everything,  and  Spain  is  in  want  of  everything. 
See  also  the  embassy  report  of  Navagero  (1526),  Viaggio  fatto  in  Spagna  e 
in  Francia  (Venct.,  1563),  and  Rankc,  Fiirsten  und  Vdlker,  I,  393  ff. 

2  The  prize  was  won  by  Arrcta  dc  Moiitcseguro.  The  author  of  the  history 
of  Portuguese  Asia,  translated  by  Stevens,  is  of  opinion  (III,  ch.  6),  that 
commerce  is  not  a  proper  subject  for  serious  history  to  treat. 


182  PRODUCTION  OF  GOODS.  [B.  I,  Ch.  II. 

34,339  merchants.^  As  a  counterpart  to  this,  the  United  States 
had,  in  1840,  about  77.5  per  cent,  of  its  population  engaged 
in  agriculture,  16.8  in  manufactures  and  mining,  4.2  in  ship- 
ping and  commerce,  1.3  in  the  learned  professions.^ 

2  There  is  a  very  fine  description,  of  this  spirit  in  Clcuard,  Epist.  I,  ad  Lat- 
omum  (1535  ff.)  Compare  Jovellanos^  in  Laborde,  Itineraire  descriptif,  IV, 
176.  Toxvnsend^  Journey  throvigh  Spain,  II,  207,  117.  ^kc^-/c,  History  of 
Civilization,  II,  ch,  I.  Tlie  census  of  17SS  gave  the  number  of  priests  and 
monks,  soldiers,  mariners,  nobles,  lawyers,  tax-gatherers,  authors,  students 
and  domestics,  at  1,221,000,  in  a  total  of  3,800,000  men;  from  -which  number 
tliere  was  a  multitude  of  beggars,  vagrants  etc.  to  be  deducted.  Laborde, 
Itineraire,  II,  32  ff.  The  seventeen  universities  and  the  numberless  small 
Latin  schools,  with  their  gratuitous  instruction,  and  their  many  scholarships, 
misled  a  disproportionately  large  number  to  engage  in  study.  At  the  begin- 
ning of  this  century,  there  were  at  least  200,000  priests,  nuns  (Geistliche), 
etc.,  in  a  population  of  from  three  to  three  and  a  half  millions  only.  (Ebe- 
ling,  Erdbeschreibung  von  Portugal,  66.)  Senior  shows  that  the  poverty  of 
the  Osman  is  caused  by  too  many  state  employees,  tax-farmers  and  retail 
merchants.  (Journal  kept  in  Turkey  and  Greece,  1S57-58.)  Thus,  also, 
y.  Tucker,  Four  Tracts,  1774,  18,  conti-asts  men  engaged  in  industry  with 
rich  idlers,  Avhose  increase,,  possibly  by  immigration,  w'ould  make  the  people 
a  nation  of  "gentlemen  and  ladies,  footmen,  grooms,  laundresses  etc." 
Schmitthcncr,  N.  CEk.,  656,  calls  a  condition  such  as  that  of  Spain,  "  national- 
economical  phthisis." 

4  Tucker,  Progi-ess  of  the  U.  S.,  137.  The  following  data  also  will  serve  for 
a  comparison:  In  Belgium,  in  1856,  it  was  estimated  that,  leaving  persons 
sans professio7i  out  of  consideration,  45.6  per  cent,  were  agriculturists,  37.2  in- 
dustrials, 6.7  in  commerce,  2.8  in  the  liberal  professions,  \.i^  force  fiibliquc,  2.1 
■propridtaires,  rentiers,  pensionnes,  3.7  domesticity.  In  Prussia,  in  1871,  of  the 
entire  male  population,  28.6  per  cent,  were  engaged  in  agi-iculture,  forest-cul- 
ture, hunting  and  fishing :  32.3  per  cent,  in  mining,  industiy,  building,  and  in 
founderies:  8.56  in  trade  and  commerce;  20.3  in  personal  services  and  handi- 
work not  belonging  to  any  of  the  groups  above  mentioned ;  2.3  in  the  army 
and  navy;  3.7  in  other  callings;  2.7  were  renters,  pensioners,  and  persons  who 
lived  by  selling  or  renting  houses,  reserving  lodgings  for  themselves  there- 
in, and  persons  who  gave  no  account  of  their  calling.  (Preuss.  statisc. 
Zeitschr.,  1875,  32.  ff.)  It  is,  however,  surprising  that  EttgcVs  Amtl.Jahrbuch, 
III,  1867,  gives  only  48  per  cent,  as  belonging  to  the  first  category,  and  25  to 
the  second.  In  the  kingdom  of  Saxony  in  1861,  25.1  per  cent,  of  the  population 
were  agriculturists  and  foresters;  56.1  were  engaged  in  industry;  7.7  in  trade 
and  commerce ;  6.8  in  art,  science,  the  service  of  the  state  and  of  private  per- 
sons; while  4.1  percent  were  Avithout  any  particular  calling,  or  returned  none. 
Bavaria,  in  1S52,  had  67.9  per  cent,  of  its  population  engaged  in  agi-iculture. 


Sec.  LIV.]  DUE   PROPORTION.  183 

We  might  be  tempted,  in  view  of  this  contrast,  to  return 
once  more  to  the  unproductiveness  of  personal  services.  It  is 
not,  however,  the  direction  given  to  the  forces  of  production, 
but  the  squandering  of  them,  that  is  injurious.  When  the 
Magyar,  through  mere  vanity,  drives  a  yoke  of  from  four 
to  six  horses  where  two  are  enough;  or  when,  as  in  183 1, 
Irish  agriculture  employed  1,131,715  workmen  to  produce  a 
value  of  thirty-six  million  pounds  sterling,  while  that  of  Great 
Britain  ^  produced  one  hundred  and  fifty  millions  a  year,  and 
employed  only  1,055,982  workmen,  these  causes  are  as  sure  to 
impoverish  the  country,  as  the  waste  of  the  Spaniards  in  sup- 
porting such  an  army  of  clergy  and  servants.  Of  course,  the 
temptation  to  waste  wealth  on  parks  is  greater  than  to  waste 
it  in  vegetable  gardens!  The  probability  that  a  man  will  ruin 
himself  by  keeping  too  many  servants  is  greater  than  that  he 


22.7  in  the  trades  and  in  manufactures ;  5.5  per  cent.,  persons  living  on  the 
interest  of  their  money,  and  by  performing  the  higher  class  of  personal  ser- 
vices; 1.9  in  the  army;  and  2  per  cent,  of  listed  poor.  In  Hermann^  Beitriige 
2ur  Statistik  des  Konigreichs  Bayern.     In  France,  according  to  the  official 

reports,  there  -were: 

1851  1S66 

AgricuUeurs 61.46  per  cent.     51.49  per  cent. 

Industricls  et  commergants 25.95       "  32-78       " 

Professions  libirales 9.73       "  9.4S       " 

To  which  it  must  be  added,  that,  in  1S51,  there  were  2.86  sans  profession  on 
dont  Ics  frofessions  7i'ont  fu  ctre  constat ics;  and  that,  in  1866,  on  the  other 
hand,  there  were  2.87  per  cent,  in  frofessions  se  rattachant  d  V agriculture^  iit- 
dustrie  et  commerce.  (Legoyt.)  In  England  and  Wales,  leaving  the  domestic 
class  out  of  consideration  (women  without  an  independent  means  of  employ- 
ment, school  children,  servant  girls  etc.),  and  also  the  "indefinite  class," 
there  were,  in  i86i,  25.3  per  cent,  of  the  population  engaged  in  agricultural 
pursuits ;  60.7  in  industrial ;  7.8  in  commercial ;  and  6.06  in  professional  pur- 
suits. In  Italy,  omitting  housewives,  children  and  infirm  persons,  there 
were,  in  1862,  57.4  per  cent,  of  the  population  engaged  in  agriculture;  22.9 
in  industrial  pursuits ;  4  in  commerce ;  and  3.9  per  cent,  in  the  army  and  iii 
the  liberal  professions.  (Annali  univ.  di  Statistica,  Febbr.,  1866.)  On  Hol- 
land, in  the  middle  of  the  17th  century,  see  J.  de  Wit,  Memoires,  34  seq. 

8  Csaflovics,  Gemalde  von  Ungarn  II,  i.     Torrens,  The  Budget:  On  com- 
mercial and  colonial  Policy,  106  ff. 


184  PRODUCTION  OF  GOODS.  [B.  I,  Ch.  II. 

will  do  the  same  by  employing  too  many  operatives.^  '  And 
all  the  more,  as  there  are  many  and  especially  important  ser- 
vices which  regulate  their  own  remuneration:  thus,  as  a  rule, 
those  of  the  statesman,  those  of  the  military  in  times  of  war, 
and  those  of  the  priest  in  the  age  of  superstition.^ 

SECTION  LV. 

THE  DEGREE  OF  PRODUCTIVENESS. 

Concerning  the  degree  of  productiveness,  it  may  be  re- 
marked that  that  application  of  the  factors  of  production  is 
most  productive,  which,  with  the  least  expenditure  of  means, 
satisfies  the  greatest  want  in  the  economy  of  a  people.  Here, 
there  is  a  continual  change,  corresponding  precisely  to  the 
change  in  wants  and  faculties.  After  a  bad  harvest,  for  in- 
stance, the  labor  which  procures  grain  from  foreign  countries 
or  the  supplies  of  former  years,  is  most  productive;  and,  after 
an  earthquake  which  has  destroyed  a  large  city,  the  labor  of 
the  builder.      Agriculture  is,  as  a  rule,  the  more  productive 

*  Precisely  as  there  are  more  people  ruined  by  spirituous  liquors  than  by 
bread.  Time  thieving  is  also  more  frequent  among  servants.  There  is 
scarcely  anything  in  agriculture  analogous  to  the  lazzaroni  who  wait  all  day 
to  help  a  gondola  to  land,  to  unload  a  coach,  etc.  There  is  is  more  in  the 
chase,  in  the  fisheries,  or  in  the  cattle  raising. 

'Compare  Basiiat,  Harmonies  economiques,  ch.  17.  Hence  ^zVwwwif/ ac- 
counts it  one  of  the  chief  merits  of  the  constitutional  state,  that  in  it,  the 
fof Illation  gardienne  does  not  regulate  its  own  remuneration.  (N.  P.,  1, 144.) 
Saint  Sinw7t,  indeed,  says  that  the  French  members  of  the  Chambre,  in  his 
time,  drew  a  revenue  from  the  state,  three  times  as  large  as  from  their  own 
resources,  and  were,  therefore,  deeply  interested  in  increasing  the  budget. 
(Vues  sur  la  Propriete  et  la  Legislation,  iSiS.)  I  would  call  attention  also  to 
the  national  over-estimation  and  over-crowding  of  learned  callings  from 
which  Germany  suffered,  even  as  far  back  as  the  time  of  Louis  XIV.  (v. 
Schroder,  Fiirstl.  Schatz-und  Rentkammer,  302  fF.) ;  to  the  disproportionate 
number  of  keepers  of  public  houses,  which  is  related  to  the  system  of  popu- 
lar assemblies,  and  is  a  regular  attendant  upon  Democracy  (Bro?iner,  Der  C. 
Aargau,  I,  451.)  Taxation-legislation  may  here  become  a  good  means  of 
popular  education. 


Sec.  LV.]  DEGREE  OF  PRODUCTIVENESS.  185 

labor  of  undeveloped  nations,  and  industry  of  highly  developed 
nations.^  ~ 

'  This  was  recognized  very  early  by  Grcgor.  Tolsan,  1,  c.  Ad.  Muller,  Elc- 
mente,  II,  255.  Sto)-ch,  Handbuch,  II,  229  ff.  (ScJileiermacJicr.,  Christ.  Sitte, 
66S.)  A.  Smith,  W.  of  N.,  II,  ch.  5,  ascribed  greater  productiveness  to  agri- 
cultural than  to  industrial  labor;  in  the  former  case,  not  only  human  labor 
■was  put  in  operation,  but  the  forces  of  nature  were  compelled  to  cooperate 
with  them.  Similarly,  Afalikus,  Additions  (1817)  to  the  Essay  on  the  Princi- 
ple of  Population,  B.  Ill,  ch.  8-12.  Principles  of  P.  E.,  217  ff.  Both  thus 
explain  the  rent  of  land,  and  so  far  as  products,  which  have  only  value  in 
exchange  are  concerned,  they  are  right.  Hence  it  is  all  the  more  surpris- 
ing that  Carey,  the  zealous  advocate  of  a  protective  tariff  and  opponent  ot 
rent,  comes  back  in  this  to  Adam  Smith.  Principles  of  Social  Science,  1858, 
II,  35,  and  passim.  Compare  also  y.  B.Say,  Traite,  II,  ch.  8;  Sismondi,  N. 
P.,  II,  ch.  5.  For  the  best  refutation  of  this  view,  see  Jiicardo,  Principles,  ch. 
2,3.  Does  not  all  labor  put  the  force  of  nature  in  operation.''  Ad  of  era 
nihil  aliiid  fotest  lioino^  quam  ut  corpora  naturalia  admoveat,  rcliqua  natura  in- 
tus  transigit.  (Bacon.)  Similarly,  Ferr/,  Meditazioni,  III,  i.  An  expression 
escapes  even  Ricardo  himself  (ch.  7),  to  the  effect,  that  capitalists  are  the 
producing  class.  ' 

^  Relying  on  very  superficial  statistics  of  England  and  France,  Ganilh  ad- 
vocates a  theory  of  the  productive  forces  of  the  several  branches  of  economy 
the  very  reverse  of  Adam  Smiih^s.  He  places  foreign  trade  first;  then  follow 
wholesale  trade,  industry  and  agriculture.     (Theorie,  I,  240  seq.) 


186  PRODUCTION  OF  GOODS.  [B.  I,  Ch.  III. 


CHAPTEB  III. 

THE  ORGANIZATION  OF  LABOR. 


SECTION  LVI. 

DEVELOPMENT  OF  THE  DIVISION  OF  LABOR. 

The  larger  a  tree  grows  to  be,  the  more  boughs  and 
branches  does  it  put  forth.  The  more  perfect  any  species  of 
animal  is,  the  more  does  it  stand  in  need  of  a  special  organ  for 
each  special  purpose.  And  thus  the  division  of  labor  has  de- 
veloped and  kept  pace  with  the  development  of  human  society. 
While  Crusoe  was  obliged  to  provide  for  all  his  wants  by  his 
own  labor,  we  find  that  in  the  wildest  Indian  family  the  male  is 
employed  in  war,  the  chase,  in  fishing,  in  the  manufacture  of 
arms  and  boats,  and  in  the  transportation  of  the  latter  during 
long  marches ;  the  female,  on  the  other  hand,  in  the  prepara- 
tion of  food,  in  the  hewing  of  wood,  the  curing  of  skins,  the 
sewing  of  clothes,  in  the  building  and  preservation  of  the  wig- 
wam, the  care  of  children,  and  the  carriage  of  baggage  when 
on  the  march.^     These  occupations,  at  first  entirely  domestic, 

^  Ausland,  1846,  No.  54.  Expressions  still  used  in  Europe,  such  as  Spin- 
delmagen  (spindle-relation),  Kunkellehen  (apron-string-hold)  etc.,  for  instance, 
suggest  this  most  ancient  and  purely  family  division  of  labor.  The  lower 
classes  of  the  population,  even  in  the  most  civilized  countries,  are  wont  to 
preserve  some  of  the  peculiar  customs  of  very  primitive  times.  Hence  it  is 
that  among  proletarians,  the  division  of  labor  between  males  and  females  is 
still  very  small.  The  employments  usual  at  different  stages  of  life  among 
men,  and  the  costumes  worn  by  them  are  much  more  uniform  than  among 
the  higher  classes.    See  Richly  Die  Familie,  1S55,  passim. 


Sec.  LVII.]  DIVISION  OF  LABOR.  187 

became,  by  degrees,  separate  industries,  which  are  constantly 
subject  to  turther  subdivision.^ 

SECTION  LVIL 

DEVELOPMENT  OF  THE  DIVISION  OF  LABOR.— ITS  EXTENT 
AT  DIFFERENT  PERIODS. 

In  the  middle  age  of  a  people,  the  division  of  labor  is  not 
carried  to  any  great  extent.  The  courtiers  of  King  Frotho 
III.  advised  him  to  marry,  "  since  otherwise  his  majesty's  rag- 
ged linen  would  never  be  mended."  Saint  Dunstan,  although 
he  occupied  a  high  position  in  politics  and  in  the  Church,  was 
an  excellent  blacksmith,  bell-founder  and  designer  of  ladies' 
robes.  Chriemhild  in  the  Nibelungenlied  was  an  industri- 
ous and  skillful  milliner.  In  the  corresponding  period  of  Gre- 
cian and  Roman  history,  we  find  Penelope  and  Lucretia  at 
the  loom,  Nausicaa,  a  laundress,  the  daughter  of  the  king  of 
the  Lestrigons,  fetching  water  from  the  spring,  Odysseus,  a 
carpenter,  a  queen  of  Macedonia  as  a  cook,  and  finally  the 
distaff"  of  Tanaquil.^  In  the  highlands  of  Scotland,  in  1797, 
there  were  a  great  many  peasants  all  of  whose  clothing  was 
home-made,  with  the  exception  of  their  caps;  nothing  coming 
from  abroad  except  the  tailor,  his  needles  and  iron  tools  gen- 
erally. But  the  peasant  himself  was  the  weaver,  fuller,  dyer, 
tanner,  shoemaker  etc.  of  his  own  family:-  every  man  jack  of 
aU  trades.^ 

^  As  Dani'zvarcK  shows,  the  jus  civile  of  the  earhest  Roman  time  is  based  on 
the  condition  of  isolated  labor,  the  later y«5  gentium^  on  the  division  of  labor. 
N.  CEk.  und  Jurisprudenz,  1857,  Heft.  I. 

1  Saxo  Gramm.,  Hist.  Dan.  V,  101.  Turna;  Hist,  of  the  A.  Saxons  B. 
VII,  ch.  II.  Nibel.,  351  if.  There  is  a  French  proverb:  die  temps  que  la  rcitic 
Berthe  filait.  Queen  Bertha  was  a  mythic  daughter  of  Charlemagne.  It 
may  be  that  the  character  meant  is  the  old  German  spinning  gooddess 
Berchta.  Concerning  the  daughter  of  Otto  the  Great,  see  DitJimar,  Merseb. 
IL    /f<>;«^;',Od.V,  31  ff.;  X,  106;  XXIII,  iSpff.    I/erodot.,  YUI,  i^'j.    Livy, 

1,57- 

2  Edefi,  State  of  the  Poor  I,  558  ff.     In  the  interior  of  Peru,  the  priest  is 


1S8  PRODUCTION  OF  GOODS.  [B.  I,  Ch.  Ill 

In  present  England,  on  the  other  hand,  the  manufacture  of 
watches  is  divided  into  one  hundred  and  two  branches  which 
have  to  be  specially  learned;  only  the  so-called  "watch-finisher" 
carries  on  other  branches  besides.  In  Wolverhampton,  it  may 
happen  that  a  man,  emplo3'ed  in  the  manufacture  of  keys, 
may  not  be  able  to  make  a  whole  key  after  an  apprenticeship 
of  ten  years,  for  the  reason  that  during  all  that  time  he  may 
have  been  engaged  only  in  filing.*  In  English  agriculture 
there  are,  according  to  German  notions,  very  few  complete 
wholes.  A  weU-marked  distinction  exists  there  between  the 
cultivators  of  corn  and  breeders  of  cattle;  and  the  latter 
are  again  divided  into  breeders  of  young  cattle,  into  fat- 
teners  of  cattle  etc.  Its  industries  are,  in  large  part,  sepa- 
rated into  provinces.  Thus,  linen  manufactures  are  confined 
almost  exclusively  to  Leeds  and  Dundee,  woolen  manu- 
factures,   to    Leeds,  ^   cotton   manufactures,   to   Manchester, 

also  usually  a  shop-keeper  (Poppig^  Reise,  II,  365) ;  in  Canada,  as  in  many  of 
the  villages  of  the  Alps  which  are  not  often  visited,  a  hotel  keeper.  In  coun- 
tries with  an  unadvanced  civilization,  the  little  division  of  labor  that  exists 
is  also  very  awkwardly  regulated.  Thus  in  Russia,  weak  children  are  very 
frequently  put  to  work  on  farms,  while  powerful  men  are  found  in  the  city 
oft'ering  all  kinds  of  eatables  and  the  pictures  of  saints  for  sale.  (StorcJi, 
Gemalde  des  russischen  Reichs  II,  364.     v.  Haxthausen,  Studien  I,  335.) 

^  Babhage,  Economy  of  Machinery,  1S33,  201.  L.  Faucher^  Angleterre  II, 
Ch.  '■'■la  Ville  des  Serruriersr  The  industrial  statistics  of  Paris,  furnished  \>y 
H.  Say  in  1S47  and  1S4S,  show  that  in  that  city  alone  there  are  325  different 
branches  of  indusby,  17  of  which  are  concerned  with  the  production  of  food; 
21  with  building;  32  with  the  manufacture  of  furniture;  21  with  that  of 
clothing;  36  with  that  of  thread  and  tissues;  7  with  skins  and  leathers;  14 
with  vehicles,  saddlery,  and  military  equipment;  33  with  chemicals  and 
pottery;  33  with  working  in  metal,  glass  etc.;  35  in  that  of  the  precious 
metals  and  jewels;  27  with  printing,  engraving  and  paper;  15  with  that 
of  wooden-ware  and  wicker- ware ;  34  with  articles  de  Paris.  Journal  des 
Economistes,  Janv.,  1853,  107.  According  to  the  industrial  almanac  of 
Birmingham,  there  are  in  that  city  manufacturers  of  buttons  in  gold,  silver, 
metal,  mother-of-pearl  etc;  manufacturers  of  hammers,  ink-stands,  coffin- 
nails,  dog-collars,  tooth-picks,  stirrups,  fish-hooks,  spurs,  pack-needles  etc. 

^  And  so  with  the  subdivisions.  Flannel  is  manufactured  almost  exclu- 
sively in  Halifax,  woolen  blankets  between  Leeds  and  Huddersfield  etc. 

^The  same  division  of  labor  was  developed  among  the  Dutch  in  the  17th 


Sec.  LVIII.]  ADVANTAGES.  189 

and  Glagow,  pottery  to  Staftbrd,  coarse  iron  to  South  Wales, 
hardwares  to  Birmingham,  cutlery  to  Sheffield.  And  so  in 
the  different  quarters  of  the  city.  Thus,  in  large  towns,  the 
banks,  stores,  offices  etc.,  are  found  in  one  portion,  with 
scarcely  any  intervening  dwelling  houses. 

On  the  division  of  labor  depends  all  differences  of  estate 
and  class,  and  all  human  culture.  It  cannot  be  claimed  that  a 
division  of  labor  does  not  exist  among  animals  f  but  those  ani- 
mals among  which  something  analogous  to  a  division  of  labor 
among  men  exists,  are  raised  far  above  all  others  by  their  hu- 
man-like economy  and  the  relative  importance  of  their  achieve- 
ments.'^ 

SECTION  LVIII. 

ADVANTAGES  OF  THE  DIVISION  OF  LABOR. 

The  advantages  of  all  suitable  division  of  labor,  consequent 
upon  the  natural  differences  of  human  faculties  and  disposi- 
tions, are  the  following: 

century,  and  excited  then  the  wonder  of  the  English.  See  Sir  W.  Temple, 
Observations  upon  the  U.  Provinces,  1672,  ch.  3.  Works,  I,  128,  143.  In 
1615,  Montchretien  held  up  the  Flemish  as  a  model  to  the  French,  in  this  re- 
spect. 

*0n  the  bees,  see  Virgil,  Georg.  IV,  15S. 

'  The  principle  of  the  division  of  labor  was  known  to  the  ancients :  Xcno- 
j)Iion,  Cyri  Discipl.,  VIII,  2,5.  Plato,  de  Rep.,  11,369,  III,  394,  IV,  443; 
Isocrat.,  Busir.,  8.  Aristot.,  Polit.,  II,  8,  S.  Among  the  more  modern  writers, 
compare  Thomas  Aquin.,  De  Reg.  pr.,  I,  i,  II,  3.  Luther  (Works  by  Walch, 
I,  388),  in  his  Commentary  on  Genesis,  3,  19.  Petty,  Several  Essaj'S,  16S2, 
p.  113.  Considerations  upon  the  East  India  Trade,  London,  1701.  Roschcr, 
Geschichte  der  englischen  Volkswirthschaftslehre,  118.  Mandevillc,  The 
Fable  of  the  Bees,  enlarged  edition  of  1723,  p.  411.  Berkeley,  Querist,  1735, 
No.  415,  430,  520  ff.,  586:  "What  is  everybody's  business  is  nobody's." 
Harris,  on  Money  and  Coins  (1757),  I,  16.  J.  J.  Rousseau,  Emile  (1762),  L. 
III.  Ttcrgot,  Sur  la  Formation  et  la  Distribution  des  Richesses,  §  3,  p.  50, 
62,  66.  Diderot,  EncyclopGdie  de  I'Art,  s.  v.  Art.  J.  Tucker,  Four  Tracts 
(1774),  p.  25  ff.  Bozcaria,  Economia  pubblica,  I,  i,  9.  But  the  author  to 
whom  we  owe  most  on  this  score  is  undoubtedly  Adam  Smith.  To  him  we 
are  indebted  almost  entirely  for  our  knowledge  of  the  natural  laws  developed 
in  §  59  seq. 


190  PRODUCTION  OF  GOODS.  [B.  I,  Cir.-III. 

A.  The  greotc}'  skill  of  the  worhnan.  Even  physically, 
many  capacities  are,  by  an  indefinite  number  of  repetitions  of 
the  same  operation,  enhanced  to  an  extraordinary  degree; 
which,  however,  renders  the  performance  of  other  operations 
more  difficult.  Thus,  the  man  who  has  developed  his  mus- 
cles and  hardened  his  hands  working  in  a  smithy,  renders 
himself  incapable  of  becoming  a  violin-player  or  an  operating- 
oculist.^  Here  belongs  especially  the  possibility  of  turning 
every  kind  of  labor-power  to  greatest  account.  Even  chil- 
dren ^  and  old  men  may  be  made,  in  this  way,  to  play  a  part 
in  the  production  of  goods.  It  becomes  practicable,  too,  to 
relieve  men  endowed  with  superior  faculties  from  common 
labor,  and  allow  them  to  devote  themselves  exclusively  to  the 
development  of  the  peculiar  powers  with  which  nature  has 
gifted  them.^ 

B.  A  great  saving  of  time  and  trouble.  The  simpler  the 
operation  performed  by  a  single  workman,  the  more  easily 
is  it  learned;  the  smaller  is  the  price  paid  for  apprenticeship, 
which  depends  on  this,  at  least,  that  beginners  perform  poorer 
work  and  are  paid  more  poorly.     "The  shortest  way  to  the 

'  According  to  Adam  Smithy  a  nailer  can  make  2,300  nails  (Rati  says  3,000 
shoemaker's  tacks  in  the  Odenwalde)  per  day ;  a  smith  who  is  only  occas- 
ionally employed  in  the  manufacture,  from  800  to  1,000;  and  smiths  who 
never  made  nails  before,  from  200  to  300.  A  clever  filer  makes  200  strokes 
in  a  minute ;  a  skilled  comb-maker  can  make  in  a  day  from  60  to  70  combs 
of  such  fineness  that  there  are  from  40  to  48  teeth  to  the  inch  in  them;  eight 
Liege  brick-makers,  working  together,  produce  4,800  bricks  per  day ;  children 
employed  in  a  needle  manufactory,  in  making  the  eyes  of  needles,  grow  so 
skillful  at  it  that  they  can  make  a  small  hole  in  the  finest  hair  and  draw  an- 
other hair  through  it.  Rati,  Lehrbuch  I,  §  115.  The  old  proverb,  "practice 
makes  perfect,"  is  followed  even  by  thieves  in  their  great  division  of  labor. 
See  Thiele^  Die  jiidischen  Gauner  I,  87.    Fregier^  Des  Classes  Dang^reuses. 

2  Children,  with  their  thinner  fingers,  can  point  twice  as  many  needles  in 
the  same  time  as  a  grown  person. 

2  The  manufacture  of  English  needles  demands,  on  the  part  of  workmen, 
degrees  of  skill  so  different  that  their  pay  varies  from  6  pence  to  20  shillings 
per  day.  If  the  most  skillful  workman  were  to  manufacture  whole  needles 
alone,  he  would  partly  be  obliged  to  be  satisfied  with  one-fortieth  of  what  he 
misfht  otherwise  receive.    Babba<re,  loc.  cit. 


Sec.  LVIII.]  ADVANTAGES.  191 

end  is  most  easil}^  found  when  the  end  itself  is  near,  and  can 
be  kept  continually  in  view."  (  y.  B.  Say^  Where  the  same 
workman  combines  different  operations,  a  great  deal  of  time 
is  lost  in  chanfjinc^  tools  etc.  Besides,  it  always  takes  some 
time  for  a  workman  to  get  rightly  under  way  of  his  work. 
Tlie  person  who  changes  thus  frequently  becomes  more  easily 
indolent.  Lastly,  there  is  a  great  number  of  operations  which 
demand  the  same  aggregate  amount  of  efibrt,  no  matter  what 
the  number  of  objects  on  which  they  are  performed.  It  is 
thus,  for  instance,  with  shepherds,  mail-carriers  etc.^  The 
post  carries  a  thousand  letters  with  almost  as  much  ease  as 
one;  and  the  entire  life  of  a  wholesale  dealer  would  scarcely 
suffice  to  carry  all  the  letters  which  he  mails  in  a  single  day, 
to  their  place  of  destination.  During  the  middle  ages,  every 
man  was  obliged  to  watch  over  his  own  personal  safety  and 
the  maintenance  of  his  own  rights;  while  in  1850,  in  Great 
Britain,  twenty-one  million  people  are  protected  in  their  per- 
sons and  property,  in  an  infinitely  more  effectual  manner,  and 
at  less  cost,  by  fifteen  thousand  soldiers,  and  by  a  much  smaller 
number  of  policemen,  whose  place  it  is  to  preserve  public 
order.  {Senior^  Something  similar  takes  place  among  mer- 
chants, and  it  may  be  admitted  as  correct  in  principle,  that 
every  new  intermediar}^,  freely  recognized  by  both  sides  in 
commerce,^  makes  labor  better  or  less  expensive. 

C.  As  the  land  of  a  country  is,  in  a  sense,  the  natural  ex- 
tension of  the  national  body,  the  international  division  0/  labor 
affords  an  indirect  means,  but  frequently  an  indispensable  one, 
of  procuring  the  products  of  foreign  countries  and  climates.^ 
If  the  English  people  wished  to  obtain  themselves,  and  with- 
out having  recourse  to  any  intermediary,  the  quantity  of  tea 

*  In  the  case  of  machines  and  in  the  chemical  branches  of  industry,  the 
labor  increases  in  a  much  smaller  ratio  than  the  material  used  in  production. 

^  In  opposition  to  monopolies,  and  to  practical  constraint  which  has  its 
source  in  ignorance  etc. 

*  Hence  Torrens  calls  foreign  trade  the  "  territorial  division  of  labour." 
(Essay  on  the  Production  of  Wealth  (1S21),  155  ff.) 


192  PRODUCTION  OF  GOODS.    :  [B.  I,  Ch.  III. 

which  they  annually  consume,  it  is  possible  that  its  whole  agri- 
cultural population  would  not  suffice  to  procure  it;  while,  at 
present,  it  is  obtained  by  the  labor  of  forty-five  thousand  in- 
dustrial workmen.  (Senior.)  Moreover,  the  division  of  labor 
increases  not  only  the  aptitude  of  the  workman  but  also  his 
incentive  to  productive  labor,  since  it  guaranties  to  every  one 
the  certainty  of  being  able,  by  means  of  exchange,  to  enjoy 
the  productions  of  every  other  person.' 


SECTION  LIX. 

CONDITIONS  OF  THE  DIVISION  OF  LABOR. 

It  is  by  its  division,  that  labor,  considered  as  a  factor  of  pro- 
duction, is  raised  to  the  highest  degree  of  efficiency.  Its  re- 
sults in  any  given  industry  are,  therefore,  more  important  in 
proportion  as  the  element  labor  predominates  in  it.  Hence, 
these  results  are  mucli  smaller,  in  agriculture,  for  instance,  than 
in  the  trades,  or  in  personal  services.^  The  most  expert  sower  or 
harvester  cannot  be  employed  the  whole  year  through  in  sow- 
ing or  harvesting.  Some  kind  of  rotation  of  crops,  some  kind  of 
combination  of  tillage  and  stock-raising  is  necessary  to  every 
agriculturist.  On  this  depends  the  importance  of  the  technic 
secondary  industries  of  agriculture,  which  are,  in  principle, 

'  See  Bastiat,  Harmonies,  ch.  i,  for  a  very  beautiful  exposition  of  the  doc- 
trine that  each  man  receives  much  more  from  society  than  he  accompHshes 
on  his  part,  for  it. 

1  The  working  together  of  a  great  number  of  persons  is  often  carried  on 
to  the  detriment  of  agriculture,  for  each  then  waits  for  all  the  others  to 
work,  throws  all  the  blame  on  them  etc.  (Columella^  I,  9.)  As  many  a 
housekeeper  must  have  observed,  two  seamstresses  or  ironers  accomplish, 
in  a  day,  less  than  one,  in  two  days.  Of  course,  this  rule  does  not  apply  in 
the  case  of  work  which  cannot  be  performed  by  one  man,  under  any  circum- 
stances, or  the  magnitude  of  which  would  easily  discourage  him,  and  in 
which  mutual  aid  is  easily  obtained ;  as  in  the  raising  of  heavy  loads,  the 
construction  of  roads,  dikes  etc. 


Sec.  LX.]  INFLUENCE  OF  THE  MARKET.  I93 

opposed  to  the  division  of  labor.  Hence,  too,  almost  any  per- 
son engaged  in  a  trade,  no  matter  of  what  kind,  supposes  a 
greater  number  of  customers  than  a  tiller  of  the  land  of  the 
same  rank. 

The  more  labor  is  divided,  the  greater  is  the  amount  of  cap- 
ital necessary  to  it.''  It  may  be  even  said,  that  all  preparatory 
labor  becomes  capital  in  its  relation  to  subsequent  labor.  If 
ten  isolated  workmen  can  produce  ten  dozen  articles  of  any 
kind,  daily,  and,  after  the  introduction  of  a  more  efficient  divi- 
sion of  labor,  fifty  dozen,  the  employer  must  provide  them,  in 
the  latter  case,  not  only  with  five  times  as  much  capital,  but 
probably  with  fifty  times  as  much,  as  then,  five  hundred  dozen 
are  making  continually. 

SECTION  LX. 

INFLUENCE  OF  THE  EXTENT  OF  THE  MARKET  ON  THE  DI- 
VISION OF  LABOR. 

But  it  is  the  extent  of  the  market  especially  which  deter- 
mines the  limits  of  the  division  of  labor;  for  there  is  a  direct 
and  necessary  relation  between  the  division  of  labor  and  the 
exchange  of  its  surplus.  Hence,  the  division  of  labor  may  be 
carried  farthest  in  the  case  of  those  products  which  are  most 
easily  transported  from  place  to  place,  and  which,  at  the  same 
lime,  possess  the  utility  that  is  most  widely  recognized.  The 
smallness  of  the  market  may  depend  upon  the  scantiness  of 
the  population,  or  upon  its  scattered  condition;^  upon  their 

^Ad.  Smitli,  B.,  II,  Introd.  Httfcland^  Neue  Grundlegung,  I,  215.  In  many 
instances,  a  division  of  labor,  of  course,  favors  the  saving  of  capital.  If  every 
■workman  needed  all  the  tools  necessary  to  the  -work  in  which  he  participates, 
three-fourths  of  them  would  have  to  lie  idle  at  present.  J.  liae,  New  Prin- 
ciples on  the  Subject  of  Political  Economy,  164. 

3  V.  Mangoldt^  Volkswirthschaftslehre,  2 1 1  ff. 

I  This  necessity  is  observable,  although  in  a  peculiar  form,  even  where 
what  has  been  called  the  "despotic  organization  of  labor"  prevails,  instead 
of  freedom. 

Vol.  I. — 13 


IQ4:  PRODUCTION  OF  GOODS.  [B.  I,  Ch.  III. 

smaller  ability  to  pay,  or  upon  the  bad  means  of  communication 
at  their  disposal.'^  Hence  it  is,  that  in  villages,  small  cities,  and 
still  more  on  isolated  farms,  many  branches  of  business  are 
carried  on  by  one  person,  which  are  divided  among  many  in 
larger  cities ;  and  this  is  especially  true  in  the  case  of  businesses 
w^hich  have  a  chiefly  local  demand.^  While,  in  small  places, 
the  barber  is  also  frequently  the  physician,  in  larger  ones  there 
are  dentists,  oculists,  accoucheurs,  surgeons  etc.* ;  and  while,  in 
the  former,  the  tavern  keeper  is  both  dry  goods  merchant  and 
grocer,  there  are,  in  the  latter,  tea  merchants,  cigar-dealers, 
dealers  in  mourning  goods  (in  London  childbed-linen  ware- 
houses) etc.,  and  hotels  for  all  the  different  classes  of  travelers. 
There  can  be  a  distinct  class  of  porters,  hack-men  etc.,  only 
where  commerce  is  very  active.^  And  even  in  cities  like  Paris, 
where  the  costly  industries  that  minister  to  luxury,  that  of  the 
jeweler,  for  instance,  admit  of  only  a  limited  division  of  labor, 
this  effect  depends  on  the  smallness  of  the  market;  a  market,  in- 

2  In  the  highlands  of  Scotland,  in  Adam  Smith's  time,  there  were  no  smiths 
who  manufactured  nails  only;  for  the  reason  that  no  smith  had  a  market  for 
more  than  i,ooo  nails  a  year,  that  is  not  for  so  many  as  might  be  manufac- 
tured in  a  single  day. 

3  It  is  of  course  very  different  when  there  is  question  of  a  foreign  market, 
even  if  it  be  only  indirectly.  Thus,  for  instance,  there  are  in  the  Hartz 
mountains,  persons  who  are  simply  post-makers,  trough-makers,  chess-wood- 
makers,  block-hewers,  shingle-makers  etc. 

^  Too  much  should  not  be  inferred  from  the  existence  among  the  Egyptians 
of  physicians,  specialists  for  the  several  members  of  the  body.  Herodot.^  II, 
84-  Something  analagous  is  to  be  found  even  among  barbarous  nations ;  but 
it  is  accounted  for  entirely  by  the  superstition  of  the  people.  See  Klcimn, 
Kulturgeschichte,  I,  266. 

5  In  the  whole  of  Hesse,  there  were  under  Philip  the  Magnanimous,  only 
two  apothecaries,  one  at  Cassel  and  one  at  Marburg.  Rommel,  Gesch.  v. 
Hessen,  IV,  p.  419,  note.  And  there  were  no  bakers  among  the  Romans 
before  the  time  of  the  war  with  Perseus.  All  the  bread  needed  by  the  family 
was  baked  by  the  wife  or  by  female  domestics.  Plin.,  H.  N.  XVIII,  28.  The 
common  oven  in  new  towns  marks  the  period  of  transition.  Even  yet,  in 
the  cenb-al  part  of  France,  there  are  localities  where  each  family  bakes  its 
own  bread  for  a  whole  month  in  advance ;  and,  in  the  Alpine  departments  for 
even  a  year  in  advance.    M.  Chevalier^  Cours  II,  366. 


Sec.  LXL]  DIVISION  OF  LABOR.  195 

deed,  which  geographicall}^  may  extend  over  the  whole  earth, 
but  which,  in  an  economic  sense,  must  always  remain  small, 
on  account  of  the  small  number  of  customers  who  have  the 
ability  to  pay  for  their  products.  The  real  wonders  produced 
by  the  division  of  labor  and  the  employment  of  machinery  we 
must  look  for  in  the  manufacture  of  the  cheapest  and  com- 
monest commodities.^ 


SECTION  LXL 

THE    DIVISION   OF   LABOR  — MEANS    OF   INCREASING    IT. 

Whoever,  therefore,  would  increase  the  division  of  labor 
among  the  people,  mustj  first  of  all,  extend  their  market ;  and 
this  is  done  most  efficiently  by  improving  the  means  of  com- 
munication. Even  in  our  day,  it  is  over  the  water-high- 
roads that  the  heaviest  articles  are  carrried  with  the  least 
expenditure  of  force  ;^  but  where  civilization  is  not  ad- 
vanced, these  highroads  possess  still  greater  advantages,  be- 
cause of  their  safety,  convenience  and  priority.  And  here  is 
the  explanation  of  the  intimate  connection  of  the  beginnings  of 
all  civilizations  with  the  existence,  near  the  scene  of  such  be- 
ginnings, of  good  natural  water-roads.  "  Even  the  wildest  in- 
habitant of  the  sea  coast  very  soon  obtains  the  idea  of  distance, 
which  is  altogether  wanting  to  the  inhabitant  of  the  primeval 
forest.  No  sooner  does  he  catch  sight  of  the  far-off  island  than 
his  yearning  after  the  distant  assumes  a  well-defined  charac- 
ter.    Bits  of  wood  floating  past  him  suggest  to  his  mind  the 

'It  is  obvious  from  the  foregoing  that,  in  decaying  nations,  in  which  the 
market  contracts  and  capital  decreases,  the  division  of  labor  also  must  grow 
less. 

'  According  to  Arago,  a  horse  uses  the  same  amount  of  force  to  draw  20 
cwt.  along  an  ordinary  road  that  he  does  to  draw  200  over  a  railroad  track, 
or  1,200  on  a  canal.  He  could  carry  scarcely  2  or  3  on  his  back!  Moniteur, 
183S,  No.  116.  It  is,  however,  certain  that  the  introduction  of  our  railroads 
has  somewhat  detracted  from  the  advantages  of  coasts. 


196  PRODUCTION  OF  GOODS.  [B.  I,  Ch.  III. 

best  material  to  buoy  himself  up  upon  the  water,  and  a  fish 
the  best  form  for  his  craft."     {Klcmm.)     Hence  the  Mediter- 
ranean  sea,   especially  the   eastern    portion,  with  the  vari- 
ous peoples  and  products  of  its  coasts,  with  its  numerous 
islands,  peninsulas  and  bays,  its  easy  navigation,  but  little  in- 
fluenced by  the  tides  or  by  ocean  currents,  was  the  principal 
seat  of  ancient  civilization.^     The  literal  meaning:  of  Attica  is 
coast-land.     (Strabo.)     The  colonization  of  a  new  country  is 
wont,  where  possible,  to  begin  on  the  coast,  especially  on  islands 
near  the  coast ;  and  to  follow  the  course  of  rivers  into  the  in- 
terior.    Even  whole  continents  occupy,  for  the  most  part,  in 
the  history  of  the  world,  the  position  assigned  them  by  their 
coast-development.^    While  it  is  hard  to  determine  whether, 
in  the  case  of  the  European  continent,  its  limbs  predominate 
or  its  trunk,  Afi-ica  may  be  said  to  be  a  trunk  without  mem- 
bers.    Its  islands,  most  of  them  insignificant  in  themselves, 
are  almost  entirely  cut  oft'  from  it  by  ocean  currents.     This  ex- 
plains why  Madagascar  had  not,  by  any  any  means,  the  influ- 
ence on  African  civilization  which  Crete,  Sicily  and  Britain 
have  had  on  the  civilization  of  Europe.     Asia  occupies,  in  this 
respect,  about  a  middle  position  between  Europe  and  Africa. 
The  trunk  of  that  continent  bears  to  its  members  about  the 
proportion  of  670,000  to  150,000  square  miles.     And  what  is 
worst  of  all,  the  middle  of  the  whole  is  an  almost  insurmount- 
able wall  between  ncrth,  south,  east  and  west  Asia.     Hence 
the  tenacious  peculiarity    and  isolated    development   of   the 
Chinese,  Malayan,  Indian  and  Arabic  civilizations ;  while  the 
three  peninsulas  of  southern  Europe,  for  instance,  have  affect- 
ed one  another  so  largely,  and  in  so  many  different  ways.^ 
The  northern  hemisphere  compared  with  the  southern,  pre- 

«  Compare  HumhoUJt,  Essai  politique  sur  I'lle  de  Cuba,  II,  205. 

^Strabo,  II,  121  ff.  In  Europe,  there  i&  one  mile  of  coast  to  every  31  square 
miles  in  the  interior;  in  North  America,  to  56;  in  South  America,  91;  in 
Asia,  100;  in  Africa,  142.     (Hiunholdt.) 

■*  If  the  original  connection  of  the  Caspian  sea  and  the  sea  of  Aral  with 
the  Frozen  Ocean  were  still  in  existence,  it  is  probable  that  an  Asiatic  Scan- 
dinavia would  have  been  formed  in  consequence. 


Sec.  LXL]  DIVISION  OF  LABOR.  197 

sents  a  contrast  similar  to  that  between  Europe  and  Africa,  or 
of  the  rich  coast-groups  of  the  Athmtic  compared  with  the 
poor  ones  of  the  Pacific.^  But  it  is  most  especially,  large, 
well-watered  plains  that  are  best  adapted  to  the  construction 
of  roads,  and  thus  to  facilitate  the  division  of  labor.  And 
while  we  find,  in  many  countries,  that  the  mountainous  re- 
gions reached  a  certain  stage  of  development  earlier  than  any 
others,  because  they  were  more  easily  protected  by  military 
force,  we  find,  too,  that  even  here,  plains,  have,  for  the  most 
part,  had  the  largest  share  of  power  and  of  civilization  (north- 
ern Italy,    northern  France,  the  plains  of   Switzerland   and 

^  What  is  true  of  the  sea  in  this  respect  may  be  claimed,  also,  though  in  a 
less  degree,  for  the  streams  that  carry  the  civilizing  fruits  of  the  coasts  far 
into  the  interior.  Nearly  all  large  cities  not  situated  on  the  harbors  of 
coasts  derive  their  importance  from  rivers ;  especially  when  they  have  been 
built  on  spots  adapted  by  nature  to  the  transhipment  of  merchandise.  That 
Venice  finally  eclipsed  Genoa  is  to  be  ascribed,  in  greatest  part,  to  its  control 
of  an  imporfant  stream,  the  Po.  The  economic  importance  of  Holland,  of 
Hamburg  and  Bremen  will,  in  the  long  run,  bear  the  same  relation  to  one 
anotlier  as  the  geographical  importance  of  the  valleys  of  the  Rhine,  Elbe 
and  Wcser.  As  nothing  is  more  disastrous  to  a  nation  than  the  loss  of  its 
coast  (we  need  only  cite  the  efforts  of  the  Lybian  kings  and,  later,  of  Philip 
of  Macedon  to  conquer  the  Greek  colonies  on  their  coasts;  and  in  more  re- 
cent times,  of  Russia  before  Peter  the  Great,  or  of  the  ZoUverein  without 
the  shores  of  the  German  sea),  so,  also,  the  economic  and  political  influ- 
ence of  a  stream  increases  as  one  approaches  its  mouth.  Hence  the  justifi- 
cation of  the  great  interest  taken  by  Germany  and  Austria  in  the  question 
of  the  Danubian  principalities.  The  United  States  recognized  this  fact  when 
they  piirchased  Louisiana  for  80,000,000  francs.  Bigtion,  Hist,  de  France 
III,  III  seq.  Readers  of  history  are  familiar  with  the  important  part  played 
by  the  three  Asiatic  Mesopotamias :  that  between  the  Euphrates  and  the 
Tigris;  that  between  the  Ganges  and  the  Brahmapootra;  that  between  the 
Hoang-Ho  and  the  Yang-tse-Kiang,  to  which  finally  the  Punjab  might  be 
added.  This  relation  is  recognized  by  popular  consciousness,  in  the  case  of 
the  Ganges,  by  the  belief  in  the  sacredness  of  the  stream.  No  river  has  had 
so  much  influence  on  civilization  as  the  Nile:  its  periodical  risings  have 
made  the  labor  of  agriculture  extraordinarily  easy ;  their  extent  and  regularity 
favored  the  progress  of  astronomy;  the  flooding  over  of  the  land  led  to 
geodesy;  the  hvdraulic  labors  necessitated  by  the  rising  of  the  waters  pro- 
duced a  school  of  architecture  to  which  the  river  furnished  an  excellent 

•ans  of  transportation  for  the  enormous  masses  to  be  moved.    K.  Ritter^ 


198  PRODUCTION  OF  GOODS.  [B.  I,  Ch.  III. 

north  Germany).  See  §  36.^  We  must  not,  however,  fail  to 
consider  the  reverse  side  of  the  picture  of  the  great  highways 
of  the  world.  The  same  reasons  that  raise  them  to  the  dig- 
nity of  lines  of  commerce,  make  them  lines  of  war;  and  even 
the  contagion  of  great  plagues  and  of  the  ruling  vices  fol- 
lovys,  as  a  rule,  the  avenues  of  trade. 

SECTION  LXII. 

THE  REVERSE,  OR  DARK  SIDE  OF  THE  DIVISION  OF  LABOR. 

There  are  hardships  often  attending  the  highly  developed 
division  of  labor,  the  dark  and  bright  sides  of  which  are  most 
strikingl}^  observable  only  in  large  cities.  However,  when  it 
is  charged  with  adding  to  the  natural  inequality  of  men,  the 
accusation  can  be  met  only  by  the  answer,  that,  without  the 
division  of  labor,  we  should  be  all  equally  poor  and  equally 
coarse ;  for  each  one  would  be  absorbed  by  the  necessity  of 
providing  for  his  lower  wants,  and  no  one  would  be  in  a  way 
to  develop  his  higher  faculties.  Even  the  poorest  man  has 
more  enjoyment  in  consequence  of  the  division  of  labor,  than 
he  could  have  living  in  a  state  of  isolation  from  his  fellow  men. 
The  most  wretched  among  us,  the  invalid  without  property 
of  any  kind,  the  father  of  a  family  with  more  children  than 
he  can  support,  would  simply  starve  in  the  primeval  forest. 

Erdkunde,  I,  p.  SSo  seq;  VI,  p.  i,i6S  seq.  In  this  matter,  also,  America  and 
Europe  have  the  advantage  over  Asia  and  Africa.  Wliile  the  Danube  is, 
in  places,  scarcely  three  German  miles  from  the  Rhine — which,  however, 
flows  in  an  almost  opposite  direction  —  in  Asia,  the  eastern  streams  are  sep- 
arated from  the  western,  and  the  northern  from  the  southern,  by  a  strip  of 
land  difficult  to  be  traveled,  and  about  300  German  miles  in  extent.  Besides, 
the  principal  streams  of  northern  Asia  have  their  exit  into  the  Frozen  Ocean, 
a  fact  which  diminishes  their  importance  greatly.  The  source  of  the  Mis- 
souri is  only  about  one  mile  distant  from  the  Columbia  river,  although  the 
two  flow  towards  opposite  seas. 

8  The  law  governing  the  march  of  civilization  from  the  mountain  to  the 
plain  and  to  coast  lands  was  observed  even  by  Strabo,  XIII,  592,  and  partly 
by  Plato,  De  Leg.,  677  flf. 


Sec.  LXIL]  THE  REVERSE,  OR  DARK  SIDE.  199 

Those  socialists  ^vho  never  tire  of  preaching  "association," 
overlook  for  the  most  part,  the  great,  free  association  which 
our  needs,  w^ants  or  tastes  are  ever  changing,  and  which  is 
given  us,  as  of  course,  by  the  division  of  labor.^  Yet  the  skill 
produced  by  the  division  of  labor  is  unavoidably  connected 
with  a  corresponding  one-sidedness.  The  Russians,  for  in- 
stance, are  exceedingly  apt,  but  they  rarely  distinguish  them- 
selves in  any  thing.  ^  Love  of  his  avocation,  or  pride  in  it,  is  a 
thing  unknown  to  the  Russian  workman.  He  shirks  all  con- 
tinuous labor.  ^  Experience  has  shown  that  the  Neapolitans 
and  Italians,  in  general,  exhibit  great  skill  when  they  work 
alone;  but  that  when  a  great  many  of  them  work  together, 
they  become  rapidly  confused.  The  English,  on  the  other 
hand,  are  slow  to  learn  anything  new,  or  to  overcome  unlooked 
for  difficulties ;  but  they  have  no  equals  as  workmen  in  organ- 
ized industries.  ^  The  difficulty  experienced  in  seeking  a  new 
calling,  where  a  high  division  of  labor  obtains,  arises  as  much 
from  the  fact  that  each  person  here  has  received  a  more  one- 
sided training,  as  from  the  necessity  he  is  under  of  competing 
from  the  first  with  only  consummate  workers.  Rousseau's 
school  has  laid  too  much  stress  on  the  tendency  of  higher  civ- 
ilization to  diminish  individual  independence,  ^land  on  sail 
crciiser  un  caiiot,  bait  re  Penuemi^  const  nitre  une  cabane,  vivre  de 
^11^  f aire  cent  lieties  dans  les  forets  sans  autre  guide  que  le  vent 
ct  le  soldi ,  sans  autre  provision  quhm  arc  ct  des  jlechcs;  c^cst 

'  Thus,  for  instance,  that  all  the  customers  of  a  shoemaker  together  form  a 
slioe-association  etc.    Dunoycr^  Liberte  du  Travail,  L.  IV,  ch.  10. 

^Storch^  Handbuch,  III,  iSS  ff.  The  Dutch  traveler,  Usselinx,  speaks  in  a 
similar  way  of  the  imitativeness  and  many-sidedness  of  the  Swedes  (Argo- 
nautica  Gustavica,  20).  Chilian  servants  (^feones)  are  a  good  combination  of 
the  cook,  the  muleteer,  builder,  courier  etc.  Once  they  have  passed  over 
a  road,  they  never  forget  it.  A  knife  stands  them  in  stead  of  most  tools,  and 
pieces  of  leather  in  stead  of  nails.    P'dfpi^.,  Reise,  I,  171  ff. 

^vo7i  Haxthatisett,  Studien,  I,  63,  113.  In  1827,  a  Russian  hatter  got  IJ 
rubles  for  a  hat,  a  German  one  35  (Sc/ioft,  N.  CEkonomie,  78). 

^  See  the  report  of  a  large  manufacturer  in  Ko/d,  England  und  Wales,  p. 
332  seq. 


200  PRODUCTION  OF  GOODS.       .       [B.  I,  Ch.  III. 

ahrs  qiCon  est  iin  homme!^  We  might  reply  that  to  build  a 
steamship  or  a  palace,  and  to  travel  around  the  world  are  far 
better.  (Dtinoyer.)  Even  physically,  civilized  man  is  supe- 
rior to  the  savage,  as  might  be  inferred  from  the  greater 
average  duration  of  life  of  the  former.  Of  course,  extremes 
should  not  be  compared,  nor  should  we  contrast  the  frame  of 
a  weaver  or  student  with  that  of  a  savage  chief.  ^ 

In  a  similar  w^ay,  the  one-sidedness  of  the  international 
division  of  labor  may  be  pregnant  with  great  danger  to  na- 
tional independence. 

SECTION  LXIII. 

DARK  SIDE  OF  THE  DIVISION  OF  LABOR.— ITS  GAIN  AND 

LOSS. 

Where,  indeed,  the  one-sidedness  produced  by  the  division 
of  labor  goes  so  far  as  to  cause  the  degeneration  ^  of  the  work- 
man's personality,  the  human  loss  of  the  nation  is  greater  than 

5  Raytial,  Histoire  des  Indes  (17S0),  L.  XV.  And  so  Rousseau,  Discours 
sur  r  Inegalite  (1754),  who  also  declaims  against  all  kinds  of  capital;  were 
there  no  ladders,  men  would  climb  better ;  and  throw  a  stone  better  if  they 
had  no  slings.  There  is  certainly  a  misunderstood  truth  in  this  saying.  It 
is  assuredly  very  salutary,  in  the  actual  state  of  society,  in  wrhich  every  one's 
business  is  transacted  for  him  by  some  one  else,  that  a  time  should  occasion- 
ally come  when  no  one  can  take  our  place,  and  a  man  can  only  call  upon 
himself.  And  herein  lies  the  immense  value  which  just  war,  when  not  much 
prolonged,  but  which  is  brought  to  a  happy  termination,  sometimes  has  upon 
the  life  of  a  people. 

6  The  American  savages  are,  on  an  average,  weaker  than  the  whites.  In  a 
fist-fight  the  Kentuckians  and  Vu-ginians  showed  themselves  far  superior  to 
the  Indians.     See  Lawrence,  Lectures,  403,  stcp-a,  §  40. 

'  For  a  very  unprejudiced  estimate  of  the  dark  and  bright  sides  of  the  di- 
vision of  laboi-,  even  before  Adam  Smith's  time,  see  Ferguson,  History  of 
of  Civil  Society  (1767),  IV,  I,  V,  3  ff.  Also  G'arw,  Versuche,  III,  41.  Adam 
Smith  was  not  blind  to  the  dark  sidfe  of  the  division  of  labor,  which,  in  part, 
he  would  remove  by  popular  instruction  at  the  expense  of  the  state,  and  by  a 
species  of  compulsory  education.  W.  of  N.,  V,  ch.  i,  3,  art.  2.  One  of  the 
chief  peculiarities  of  J.  Moser's  Political  Economy  is  his  great  opposition  to 
all  highly  developed  division  of  labor.    Patr.  Ph.,  I,  2,  21,  III,  32,  34. 


Sec.  LXIII.]         THE  REVERSE,  OR  DARK  SIDE.  201 

the  material  gain  purchased  by  it.  Thus  the  occupation  of 
polishing  metals  or  gilding,  when  continued  for  a  long  time 
without  interruption,  invariably  ruins  the  health.  What  must 
be  the  aspect  of  the  soul  of  a  workman  who,  for  forty  years  has 
done  nothing  but  watch  the  moment  when  silver  has  reached 
the  degree  of  fusion  which  precedes  vaporization!  who  is 
blind  to  all  else,  but  receives  a  good  fat  salary  for  his  services.^ 
Schleiermacher  rightly  declared  all  human  action  which  is 
purely  mechanical,  through  which  man  becomes  a  living  tool 
(slave!)  immoral.  When  the  division  of  labor  has  reached 
this  point,  machines  should  take  the  place  of  men.  The  mor- 
ality of  a  profession  may  be  measured  by  the  degree  in  which 
it  corresponds  with  the  universal  calling  of  the  race.^  It  is 
not,  therefore,  a  piece  of  inconsistency  but  rather  a  deeply  felt 
want,  when,  where  civilization  is  at  its  highest,  so  many  de- 
mands are  made  that  the  division  of  labor  should  take  a  ret- 
rograde path.  The  practice  of  gymnastic  exercises  by  the 
sedentary  classes,  universal  military  duty,  the  participation  of 
citizens  in  municipal  government  and  in  political  affairs,  of  lay- 
men in  the  government  of  the  church,  of  the  wealthy  in  the 
administration  of  charity;  all  these  things  are,  from  a  materi- 
alistic stand-point,  considered  a  great  squandering  of  time.  It 
may  be,  that,  if  the  division  of  labor  were  more  rigidly  car- 

*  von  Ledebur,  Reise  in  Altai,  I,  384.  The  working  together  of  wife  and 
child,  introduced  recently  by  manufacturers,  cannot  be  considered  as  a  higher 
grade  of  the  division  of  labor,  but  only  as  a  very  unfavorable  change  in  the 
kind  of  it;  inasmuch  as  it  were  better  to  employ  the  women  in  their  domes- 
tic avocations  and  to  leave  children  to  their  studies  and  their  sports.  Among 
the  higher  classes,  it  should  be  made  the  pai't  of  female  education,  to  coun- 
terbalance, in  the  family,  the  effects  of  the  ever  increasing  division  of  labor 
among  the  male  portion,  by  the  development  of  that  which  is  universally 
human  —  art,  sociability,  house-keeping  etc. 

^  ScMcicnnacJici;  Christliche  Sitte,  465  ff.,  676  ff.,  154  ft".  From  a  similar 
feeling,  although  much  exaggerated,  the  Greeks  of  the  classic  age  proper 
considered  all  callings  followed  for  gain  dishonorable,  not  excepting  even 
those  of  the  physician  and  of  the  teacher.  Plato,  de  Rep.,  I,  347  ft".  Artsiof., 
Rhet,  I,  9,  27:  fir^dtiAav  ioyd^ea&ac  ^dvovaov  xkyyr^v^  hltudkqov 
yaq  xo  [xri  nod:;  dXXov  l^r^v. 


202  PRODUCTION  OF  GOODS.  [B.  I,  Ch.  III. 

ried  out,  we  might,  by  its  means,  obtain  more  perfect  results 
with  less  economic  expense.  But  the  whole  man  is  of  more 
importance  than  the  sum  of  his  achievements  and  enjoyments. 
(Luke,  9:25.)  Wo  to  the  nation  where  only  jurists  have  a 
developed  sense  of  the  right,  where  political  judgment  and 
cultivated  patriotism  are  the  portion  of  only  officials  and  place- 
men, where  only  the  standing  army  has  warlike  courage,  and 
the  clergy  only  conscious  religiousness;  where  parents  leave 
all  care  for  education  to  the  teachers  of  the  various  branches 
of  learning,  and  where  physical  vigor  is  to  be  found  only 
among  the  proletarians.  Hence  there  is  nothing  more  ruin- 
ous than  premature  one-sided  education  in  a  single  trade  or 
profession  —  a  thing  which  often  happens  from  poverty  be- 
fore the  foundations  of  the  general  education  becoming  a  hu- 
man being  have  been  laid.  The  higher  a  man's  position,  the 
more  should  he,  so  to  speak,  be  a  representative  of  the  whole 
human  race.  Who,  for  instance,  would  wish  to  see  a  ruler 
brought  up  as  men  are  to  a  special  branch  of  science  or  to  a 
special  profession  ?  ^  ^     The  best  corrective  for  the  one-sided- 

^  As,  for  instance,  the  superintendent  of  a  manufactory  must  have  a  better 
general  training,  but  can  get  along  with  less  of  a  special,  than  his  workmen, 

*  Thucydides  says  of  the  contemporaries  of  Pericles :  "  The  same  men 
devote  themselves,  among  us,  in  part  to  domestic  and  political  busi- 
ness ;  in  part,  others  who  busy  themselves  with  agriculture  and  industy  have 
no  mean  knowledge  of  the  affairs  of  state.  We  call  those  who  take  no  part 
in  the  former  not  people  loving  their  ease,  but  useless  men."  (II,  40.) 
During  the  succeeding  period,  Athens  was  destroyed  mainly  by  the  ever 
increasing  division  of  labor  between  citizens  and  soldiers.  For,  "  to  separate 
the  arts  which  form  the  citizen  and  the  statesman,  the  arts  of  policy  and 
•war,  is  an  attempt  to  dismember  the  human  character,  and  to  destroy  those 
very  arts  we  mean  to  improve."  {Ferguson^  We  know  from  Valerius 
Maxtmus^  that  the  Roman  soldiers  from  the  time  of  Marius  had,  doubtless,  a 
better  technic  training  than  their  ancestors  who  who  defeated  Hannibal ;  but 
was  it  in  a  military  or  political  sense  that  they  were  thus  better  trained.? 
The  beautiful  definition  of  Cato  intimates  something  of  the  same  nature; 
the  good  orator  was  vir  doniis  di'cendi  J>cftii{s.  {^la'jiiilrai/,  XII,  I.)  And  so 
Garve,  Versuche,  IV,  51  fF.,  expects  from  the  political  elevation  of  citizenship, 
of  those  possessed  of  the  right  of  citizens,  not  only  usefulness  in  a  particular 
direction  but  the  development  of  the  whole  man,  a  thing  hitherto  expected 
only  of  the  nobility. 


Sec.  LXIV.]  CO-OPERATION  OF  LABOR.  203 

ness  produced  by  a  high  division  of  labor  consists  in  the  ex- 
tension and  many-sided  employment  of  leisure  time,  both  of 
which  are  made  more  easy  l)y  the  same  high  civilization  which 
always  accompanies  the  division  of  labor.® 


SECTION  LXIV. 

THE  CO-OPERATION  OF  LABOR. 

The  cooperation  or  combination^  of  labor  must,  however, 
always  correspond  to  the  division  of  labor.  Both  are  but  dif- 
ferent sides  of  the  one  idea  of  social  labor;  the  separation  of 
different  kinds  of  labor,  in  so  far  as  they  would  disturb  one 
another,  and  the  union  or  combination  of  them  so  far  as  they 
help  one  another.^  The  vintner  or  grower  of  flax  would  neces- 

*  As  one's  peculiar  calling  does  not  take  up  all  his  Hie,  we  must  draw  a 
clear  distinction  between  the  one-sidedness  of  labor  and  the  one-sidedness  of 
life.  (vo7i  Mangoldt^  Volkswirthschaftslehre,  227.)  Only  the  last  is  to  be 
avoided  at  all  hazards ;  and  we  find  it  in  the  middle  ages,  with  its  limited  di- 
visions of  labor,  perhaps  more  frequently  than  where  civilization  has  at- 
tained a  higher  stage.  During  the  middle  ages,  it  was  not  unusual  to  make 
feelings  which  every  one  should  cultivate  at  times,  if  only  temporarily,  the 
lasting  calling  of  some.  Thus  one  prayed  his  whole  life  long,  or  was  en- 
gaged in  contemplation,  and  relieved  others  of  the  necessity  of  performing 
these  duties.  The  consequence  was,  that  the  latter  sank  as  deeply  in  world- 
liness  and  want  of  tlie  interior  spirit  as  the  former  were  plunged  in  idleness 
and  hj'pocrisy.  But,  on  the  other  hand,  when,  in  our  day,  the  printer  re- 
lieves the  writer  of  a  portion  of  the  labor  which  might  be  his,  the  personal 
development  of  neither  suffers. 

^  L''uomo  euii'  tal  potcnza^  chetcnitaalV  gltra  nonfa  un  eguale  alia  soinina,  ma 
al  qiiadraio  delta  somina.  (Gcnovesi.)  As  to  how  the  action  of  every  individu- 
al man  is  a  species  of  division  and  union  of  different  kinds  of  labor,  see 
Siein,  Lehrbuch,  24. 

*  Compare  Ad.  Miiller,  Elemente  der  Staatskunst,  III,  1809.  Fr.  List,  Sys- 
tem der  polit.  CEkonomie,  222  ff.,  409  ff.  IVakcJield,  in  his  edition  of  Adam 
Smith,  distinguishes  two  degrees  of  cooperation,  simple  and  complex.  In 
the  case  of  simple  labor,  the  same  sort  of  work  is  performed  at  the  same 
time  and  place  by  several  individuals,  as,  for  instance,  by  a  lot  of  hod-carriers 
in  building.  In  the  other  case,  there  are  different  kinds  of  work  performed 
at  different  times  and  places,  but  all  intended  for  the  one  greater  end.   Agri- 


204  ^  PRODUCTION  OF  GOODS.  [B.  I,  Cii.  III. 

sarily  die  of  hunger  if  he  could  not  certainly  count  on  the  grower 
of  corn.  The  workman  in  a  pin-factory,  who  prepares  only 
the  heads  of  pins,  must  be  sure  of  his  colleagues  who  sharpen 
the  points,  if  his  labor  would  not  be  entirely  in  vain.  The  la- 
bor of  the  merchant  is  not  even  thinkable  without  that  of  the 
different  producers  between  whom  he  mediates.  Where  the 
production  of  a  certain  article  depends  on  the  services  of  six 
different  kinds  of  labor,  one  of  which,  however,  demands  thrice 
the  time,  and  another  twice  the  time  of  the  rest,  it  is  clear, 
that,  in  order  that  the  business  may  be  properly  carried  on,  so 
many  workmen  should  be  employed  that  their  number  divided 
by  9  should  leave  no  remainder.  (Ran.)  The  union  or  com- 
bination of  different  kinds  of  labor  is  most  perfect  when  the 
workmen  live  nearest  together ;  when,  therefore,  they  are  not 
separated  by  great  difficulties  of,  transportation ;  or  in  different 
countries,  in  which  case,  a  war  might  tear  all  to  pieces. 

SECTION  LXV. 

THE   PRINCIPLE   OF   STABILITY,  OR  OF  THE  CONTINUITY 

OF  WORK. 

Cooperation  in  time  is  of  equal  importance :  the  principle  of 
the  stability,  or  of  the  continuity  of  labor.  When  a  workman 
dies,  it  is  necessary  to  be  able  to  calculate  on  a  substitute.  It 
is  well  known  that  it  is  much  harder  to  begin  a  business,  than 
it  is,  afterwards,  to  improve  and  enlarge  it ;  and  this,  the  more 
complicated  it  is.  A  new  enterprise  will  take  root  easily,  only 
where  there  are  several  similar  ones  already  in  existence ;  a 
new  manufacturing  establishment,  for  instance,  where  by  the 
existence  of  other  such  establishments,  the  requisite  habits  of 
the  workmen,  of  capitalists  and  of  the  public  in  general,  have 
been  previously  developed.  The  skill  of  workmen  is  propa- 
gated especially  by  observation  and  the  personal  emulation  of 

culture  aflbrds  room  for  the  first  especially,  and  it  is  known  also  to  a  great 
number  of  animal  species. 


Sec.  LXV.]  PRINCIPLE  OF  STABILITY.  205 

the  young;  whence  it  is,  that  the  introduction  of  new  indus- 
tries is  best  made  by  the  immigration  of  skilled  workmen.'^ 
Hence  the  baleful  influence  of  such  interruptions,  as  for  in- 
stance, the  repeal  of  the  edict  of  Nantes.  Hence  too,  it  is, 
that  despotism  and  the  reign  of  the  populace  are  so  unfavor- 
able to  the  economy  of  a  country,  where  there  can  be  no  guar- 
anty of  a  consistent  observance  and  development  of  the  laws. 
To  the  best  applications  of  the  principle  of  the  continuity 
of  labor  belong  the  church-building  of  the  middle  ages,  the 
national  canals,  the  street  and  fortification  systems  of  modern 
times ;  all  of  which  have  been  created  only  by  the  cooperation 
of  several  generations  to  the  same  end."  The  most  striking 
means  by  which  such  a  cooperation  has  been  advanced  in 
modern  times  is  public  credit,  "  a  draft  on  posterity ; "  yet,  all 
saving  is,  in  principle,  the  same.  The  most  powerful  element 
in  the  cooperation  in  time  of  labor  is  the  economy  in  common 
of  the  family,  although  it  differs  in  degree,  according  to  the 
diflerent  kinds  of  family  inheritance.  Where,  as  among  the 
English  middle  classes,  it  is  customary  to  secure  the  business 
property  of  the  family  to  one  child  by  will,  and  to  entrust  the 
conduct  of  the  business,  during  the  life  of  the  father,  to  the 
devisee,  to  provide  for  the  other  children  by  insurance,  by  sav- 
ings etc.,  made  from  the  surplus  of  the  business,  there  may  be 
old  firms  which  remain  always  new,  however ;  because  they 
combine  the  experience  of  age  with  the  energy  of  youth,  and 
are  never  broken  up  by  a  division  of  the  inheritance.     But  the 

*  Flemish  weavers  in  England,  French  refugees  in  Protestant  countries ; 
German  miners  in  Spain,  Scandinavia,  Hungary  and  America. 

*  This,  so  very  largely  developed  in  Egypt  and  India,  Avhere  the  principle 
of  caste  obtains,  is  very  little  developed  in  the  despotisms  of  Asia.  The  great 
princes,  in  the  lattei  covintries,  build  largely  from  vanity  only.  Hence  their 
successors  seldom  complete  their  works,  and  scarcely  repair  them.  Nowhere 
else  are  there  so  many  half  completed  and  yet  decaying  buildings.  Klcmm, 
Kulturgeschichte,  VIII,  86.  Rtedel,  N.  CEkonomie  I,  259,  very  correctly  re- 
marks that  such  kinds  of  cooperation  as  contribute  most  to  the  propagation 
of  skill,  both  in  commerce  and  manual  labor,  have  less  real  division  of  labor, 
and  vice  versa. 


206  PRODUCTION  OF  GOODS.  [B.  I,  Ch.  Ill 

compulsory  equality  of  heirs,which  actually  obtains  in  France, 
compels  almost  ever}'-  new  generation  to  begin  with  a  new 
firm.     (See  §  85  seq.)  ^ 


SECTION  LXVI. 

ADVANTAGE  OF  LARGE  ENTERPRISES. 

On  the  results  of  the  division  and  cooperation  of  labor  rests 
the  superior  advantage  of  all  great  undertakings,  and  they  are, 
therefore,  smaller  in  agriculture  than  in  industry.  "It  is 
harder  to  acquire  the  first  thousand  than  the  second  million." 
Abstraction  made  of  the  conditions  of  capital  and  of  the  mar- 
ket, the  limit  up  to  which  the  growing  magnitude  of  an  enter- 
prise becomes  more  advantageous,  lies  in  the  increasing  difficul- 
ty of  superintendence.  Numberless  commercial  improvements, 
such  as  the  post-ofiice,  railroads,  telegraphs,  exchange,  banks 
etc.,  have  operated  powerfully  to  extend  these  limits.  It  is 
frequently  possible,  even  in  small  enterprises, to  secure  the  ad- 
vantages of  large  enterprises,  by  association  among  those  con- 
cerned. They  must,  of  course,  possess  the  necessary  capital. 
If  they  have  not  got  it,  as  property,  they  must  borrow  it.  It 
is,  of  course,  peculiarly  difficult  here  to  preserve  the  neces- 
sary unity,  without  which  the  cooperation  of  labor  becomes 
the  confusion  of  labor.  The  more  moral  and  intelligent  the 
participants  are  and  the  simpler  the  business,  the  more  exten- 
sive may  it  become,  and  the  more  probable  will  be  its  suc- 
cess.    (§  90.)  ^  ^  ^ 

8  Compare  Leplay,  La  Reforme  sociale  en  France  (1864). 

1  Concerning  association  in  general,  see  M.  Chevalier^  Coi'.rs,  III,  Le^on, 
24,  25.  On  this  subject  so  much  talked  of  in  our  day,  see,  more  in  detail,  con- 
cerning its  application  to  agriculture,  my  work,  Nationalokonomik  des 
Ackerbaues,  4,  §  39,470".;  68,  133  ff.;  on  its  application  toindustryj  especially 
where  there  is  question  of  the  relation  of  handiwork  and  manufactures  to  large 
factories;  see  Roschcr,  Ansichten  der  Volkswirthschaft,  II,  Aufl.,  1S61,  Ab- 
handlung,  IV,  V. 

^Adam  Stnith  remarked  that  the  laws  of  the  division  of  labor  obtain  also  in 
intellectual  works ;  and  indeed,  among  all  nations  in  a  very  low  grade  of 


Sec.  LXVII.]  THE  ORIGIN  OF  SLAVERY.  207 


CHAPTER  IV. 

FREEDOM  AND  SLAVERY. 


SECTION  LXVII. 

THE  ORJGIN  OF  SLAVERY. 

An  institution  like  that  of  personal  bondage,  which,  it  can 
be  shown,  has  existed,  among  all  nations  of  which  history  gives 

civilization,  the  germs  of  all  art  and  science  are  found  connected  with  theol- 
ogy; and  later,  the  germs  of  all  poetry  and  history  -with  the  epic.  The  ex- 
pression :  non.  defiiit  Iioiiiiiii,  sed  scicntice,  quod  ncscivit  Saliiiasiiis,  is  a  clear 
proof  of  the  insignificance  of  the  science  of  the  time.  Think  of  the  increase 
during  the  last  hundred  years  of  the  branches  of  study  in  our  German  uni- 
versities. There  are  now  thirty -four  regular  professors  in  the  Leipzig 
philosophical  faculty,  where  then  there  were  only  nine.  But  here  also  the 
principle  proves  true,  that  an  excessive  division  of  labor,  where  the  broader 
connection  and  the  deeper  foundation  of  all  sciences  disappear  from  the  con- 
sciousness, undermines  intellectual  health  and  freedom.  And  the  injury  here  is 
greater  and  more  irreparable  than  in  the  domain  of  mere  physical  labor.  See 
Hufelandy  N.  Grundlegung,I,  207  ft'.  If  we  have  just  become  Alexandrians, 
we  have,  however,  no  Aristotle  to  hope  for.  Jurisprudentia  est  divinarum 
atquc  Jiumanarum  rerum  notitia,jusii  atque  injusti  scientia  (Ulpian).  It  is  re- 
markable that  nations  who  possess  no  real  national  literature  of  their  own, 
when  they  once  get  beyond  the  bounds  of  utter  barbarism,  learn  foreign  lan- 
guages etc.,  most  easily. 

3  The  socialistic  Utopia  of  Ch.  Fourier  (The^orie  des  quatre  Mouvements, 
180S.  The'orie  de  I'Unitd  universelle,  1S22.  Le  nouveau  Monde  industriel 
et  societaire,  1S29)  are  based  upon  the  following  fundamental  ideas.  A.  The 
present  civilization  is  that  of  a  topsy-turvy  Avorld,  especially  in  so  far  as  it 
ascribes  a  "  moral "  (a  word  always  used  by  him  in  an  ironical  sense)  self- 


208  PRODUCTION  OF  GOODS.  [B.  I,  Ch.  IV. 

US  information,  at  one  time  or  another,  must  have  very  gen- 
eral causes.  Among  these  may  be  mentioned  especially  sub- 
jection through  war.  It  is  not  possible  to  calculate  how  much 
the  principle,  that  it  was  proper  to  reduce  the  man  to  slavery 

government  to  man.  In  Fourier's  world,  on  the  other  hand,  every  man  is 
supposed,  at  all  times,  to  give  free  rein  to  every  ^assioti;  and  the  play  of 
these  gratifications  constitutes  the  hannonie^  in  which  the  poorest  find  more 
enjoyment  than  do  kings  at  the  present  time.  (See  §  207  of  this  work.)  B. 
The  main  thing  to  further  this  is  a  radical  reform  in  the  division  and  co- 
operation of  labor  as  they  exist  at  present.  Instead  of  the  present  villages 
and  cities,  we  should  have  only  phalansteries,  each  with  2,000  inhabitants,  and 
situated  in  the  center  of  the  land  cultivated  by  them.  Instead  of  the  present 
nations  and  states,  we  should  have  a  universal  confederate  republic,  hierarch- 
ically graded,  with  French  as  the  universal  language.  According  to  the  diQ- 
mands  of  the  passion ^a/illontie,  each  one  should  carry  on  the  most  different 
kinds  of  business  side  by  side,  and  each  one  of  them  at  most  two  hours  per 
day ;  i.  e.,  every  one  should  be  a  dilletante,  no  one  a  master,  and  everything 
should  be  done  as  badly  as  possible.  Proud/ioii,  Contradictions  economiques, 
ch.  3,  objects  to  this,  that  a  workman  must,  in  some  way,  be  held  responsible 
for  his  Avork.  Fourier  himself  calculates  that,  in  his  Iiarmonie  all  pleasures 
are  productive  labor;  and  that  by  this  constant  change,  one  might  be 
satisfied  with  from  4 >^  to  5>2  hours  of  sleep,  and  that  even  children  2}^  years 
old  might  take  part  in  the  work.  Thus,  there  would  be  a  great  rivalry  be- 
tween apple-growers  and  pear-growers,  so  great  "  that  more  intrigues  in  at- 
tack and  defense  [passi'oti  cabaliste\  would  arise  there  than  in  all  the  cabinets 
of  Europe,"  in  the  settling  of  which  the  growers  of  quinces  would  act  as  in- 
termediaries. There  are,  in  addition  to  all  this,  wonderful  aids ;  a  fructifying 
crown  of  light  rises  over  the  north  pole;  oranges  bloom  in  Siberia;  the  sea 
becomes  as  delicious  as  lemonade ;  dangerous  animals  die,  and  in  their  stead 
anti-lions  and  anti-whales  come  into  being,  animals  useful  to  man,  which 
draw  his  ships  for  him  during  calms.  These  ideas  are  by  no  means  retracted 
in  Fourier'' s  later  works.  See  Nouveau  Monde  (Oeuvres)  IV,  447.  The  prop- 
ositions of  Robert  Ozven^A.  new  View  of  Society  (1812),  have  much  similarity 
with  those  of  Fourier.  They  differ  only  in  the  absence  of  the  French  bar- 
rack-like character  of  the  phalanxes,  and  the  fantastic  character  of  the  pre- 
sentation of  the  doctrine.  He  would  have  all  the  land  divided  into  districts 
of  1,000  acres  each;  each  district  to  have  a  four-cornered  town  with  1,000 
inhabitants,  following  a  system  of  production  and  consumption  in  common, 
but  not  with  full  equality;  carrying  on  both  agriculture  and  other  business. 
A  principal  feature  here  is  an  entirely  new  system  of  education.  The  author 
says  that  man  has  hitherto  been  the  slave  of  an  execrable  trinity:  positive  re- 
ligion, personal  property  and  indissoluble  wedlock.  (Declaration  of  mental 
independence.) 


Skc.  lxvil]         the  origin  of  slavery.  200 

whom  it  was  considered  right  to  kill,  contributed  to  make  war 
less  blood}^  in  an  uncivilized  age.'  A  nation  of  hunters  is  al- 
most compelled  to  grant  no  quarter;  the  conqueror  would  be 
obliged  either  to  feed  his  prisoner  or  to  put  arms  in  his  hands. 
It  is  certainly  a  great  humanitarian  advance,  when  this  state 
of  things  is  superseded  by  slavery  among  nomadic  nations.^ 

In  times  of  peace,  economic  dependence  is  the  result  of  pov- 
erty, excessive  debt  etc.^  Where  there  is  no  division  of  labor, 
the  individual  has  no  means  of  supplying  his  wants,  except  by 
cultivating  a  spot  of  ground.  But,  how  can  the  poor  wretch 
who  has  neither  capital  *  nor  land  exchange  anything  of  value 
for  either?  Such  an  advance,  where  there  is  no  security  in 
law,  can  be  made  only  on  the  credit  of  a  verj-  important  pledge. 
But  the  man  who  is  destitute  of  all  property  can  ofler  nothing 
but  the  productive  power  of  himself  or  of  his  family.^     And 

'  Compare  Tacitus,  Histor.,  II,  44. 

'  See  Isclin,  Geschichte  der  Menscheit  (1764),  III,  7.  Bazard,  Exposition 
de  la  Doctrine  de  Saint  Simon,  1S31,  153.  Among  negro  nations  deprivation 
of  freedom  is  one  of  the  most  usual  punishments  for  crime ;  but  the  criminal 
has  the  option  of  substituting  his  wife  or  child  for  himself.  L.A.  de  Olivetra 
Mcndez,  in  the  Memor.  econom.  of  the  Rojal  Academy  of  Lisbon,  vol.  IV, 
I,  1S12.  As  to  slavery  on  account  of  crime  among  the  Germans,  see  Grimm, 
D.  Rechtsalterth.,  32S  seq. 

3  Loss  at  play  was  a  frequent  cause  of  slavery  among  the  ancient  Germans. 
Tacit.,  Germ.,  24.  For  the  principal  causes  of  slavery  among  the  Israelites, 
see  the  books  of  Moses,  II,  22,  3;  III,  25,  39;  IV,  21,  26  seq.;  among  the  In- 
dians, Laws  of  Menu,  VIII,  415.  The  first  serfs  of  Russia  were  prisoners  of 
war  and  their  children.  The  laws  of  Jaroslaws  recognize,  besides,  the  fol- 
lowing causes:  insolvency,  contracting  marriage  with  a  slave,  the  illegal 
breach  of  a  contract  for  service,  flight,  unconditional  contract  for  service. 
Karamsiii,  Russ.  Gesch.,  II,  37. 

*  At  least  seed  and  tlie  means  of  subsistence  until  harvest  time. 

5  Cases  of  voluntary  slavery  to  escape  famine.  Pafencordt,  Geschichte 
der  Vandalen,  186;  Victor,  Chron.,  V,  17;  Tur.,  VII,  45;  Lex  Bajuv,  VI,  3; 
L.  Fris,  XI,  I.  According  to  the  Edictum  Pistense  (a.,  S64),  c,  34,  one 
could  free  himself  again  by  paying  back  the  purchase  money  and  20  per 
cent,  in  addition.  It  freqviently  happened  that  people  spontaneously  ac- 
cepted the  condition  of  a  vassal  in  order  to  enjoy  the  protection  of  a  power- 
ful personage.  See  Stiivc,  Lasten  des  Grundcigcnthums,  p.  74.  In  1S12,  a 
young  Himalayan  offered  himself  to  the  traveler  Moore: oft  as  a  slave  in  or- 
VoL.  I. — 14 


2.10  PRODUCTION  OF  GOODS.  [B.  I,  Ch  IV 

SO  it  is  with  the  small  landed  proprietor  who  has  lost  all  his 
capital ;  ^  for,  considering  the  superabundance  of  land,  the  part 
which  he  possesses  has  value  in  exchange  only  to  the  extent 
that  it  is  joined  with  the  certainty  of  being  cultivated;  and 
here  is  the  origin  of  the  glcbcB  adscriftio.  The  hereditary 
transmission  of  the  relation  to  the  children  seems  to  be  equal- 
ly useful  to  them ;  or  who,  were  this  not  the  case,  would  think 
of  providing  them  with  food?  It  also  frequently  happens  that 
poor  parents  prefer  to  sell  their  children  to  seeing  them  starve.'' 
Hence  the  strange  fact  that  most  nations  have  the  most  rigid 
system  of  slavery  precisely  at  the  time  that  the  soil  produces 
food  most  readily.  We  need  only  cite  the  instance  of  the 
South  Sea  Islands,,  at  the  time  of  their  discovery.  In  many 
negro  countries,  where  the  people  have  not  yet  learned  to  use 
animals  for  transportation,  the  lowest  classes,  although  they 
enjoy  a  nominal  liberty,  are  used  as  beasts  of  burden.^ 

der  to  obtain  food  during  the  famine.  K.  Ritter,  Erdkunde,  III,  p.  999. 
The  same  fact  occurred,  but  in  greater  proportions  under  Joseph  in  Egypt. 
Moses,  I,  47,  iS  seq. 

6  CcBsar,  B.  C,  VI,  13. 

'  Solon  was  the  first  to  prohibit  tliis  commerce  in  Athens.  Kindlinger,  in 
his  Geschichte  der  deutschen  HOrigkeit,  p.  621,  speaks  of  a  child  promised 
as  a  slave  before  its  birth,  bj  its  parents,  as  a  species  of  farm-rent.  (See  the 
Edictum  Pistense,  in  Baluz,  II,  192.)  In  Chili,  the  poorest  country  people 
"who  Avere  not  entirely  white,  sold  their  children  in  the  towns,  where  they 
grew  up  with  the  families  of  their  masters,  and  were  then  kept  as  servants  in 
a  state  of  semi-serfdom.  There  is,  it  is  true,  no  law  governing  this  condition 
of  things.     (Popfig,  Reise,  I,  201  ff.) 

^Ritfer,  XIII,  727.  For  instance,  men  in  South  America  used  for  the 
purpose  of  riding.  M.  Chevalier,  Cours,  I,  251;  LcEzvenstcrn,  Le  INIexique, 
Souvenirs  d'un  Voyageur  (1S43);  and  Sfcfhens,  Travels  in  Yucatan  (1S41), 
show  how,  even  yet,  in  Central  America,  although  the  Indians  are  legally 
free,  yet,  by  their  senseless  way  of  running  into  debt,  a  number  of  legal  re- 
lations, amounting  virtually  to  glelxe  adscriftio,  arise.  But  compare,  how- 
ever, Humboldt,  Neuspanien,  IV,  263.  This  condition  of  things  has  been 
produced  in  Peru,  also,  by  the  payment  of  one  or  two  years'  wages  in  ad- 
vance.   (Popp'g,  Reise,  II,  225.) 


Sec.  LXVIII.]         THE  ORIGIN  OF  SLAVERY.  211 

SECTION  LXVIII. 

THE  SAME  SUBJECT  CONTINUED. 

In  all  very  low  stages  of  civilization,  the  greatest  absence 
of  the  feeling  of  wants,  and  the  greatest  indolence,  are  wont 
to  prevail,  and  in  the  highest  degree.  As  soon  as  their  merest 
necessities  are  provided  for,  men  begin  to  look  upon  labor  as 
a  disgraceful  occupation,  and  indolence  as  the  highest  kind  of 
enjoyment.  (§41,  213  It.)  Sustained  and  voluntary  efforts, 
in  any  number,  then  become  possible  only  by  the  creation  of 
new  wants ;  but  these  new  wants  suppose  a  higher  civilization. 
Escape  from  this  sorry  circle  is  then  effected  in  the  most  hu- 
mane manner,  through  the  agency  of  foreign  teachers;  inas- 
much as  the  representatives  of  a  more  highly  cultivated  people 
(missionaries,  merchants  etc.),  by  their  own  example,  make 
the  nation  acquainted  with  more  wants,  and  at  the  same  time 
help  toward  their  satisfaction.^  But,  in  the  case  of  nations 
whose  civilization  is  completely  isolated,  or  having  intercourse 
only  with  others  equally  low,  progress  is  the  creature  of 
force  exclusively.  The  barbarous  isolation  of  families  ceases 
when  the  strongest  and  most  powerful  force  the  weaker 
into  their  service.  It  is  now  that  the  division  of  labor  really 
begins  :  the  victor  devotes  himself  entirely  to  work  of  a  higher 
order,  to  statesmanship,  war,  worship  etc. ;  the  very  doing  of 
which  is  generally  a  pleasure  in  itself.  The  vanquished  per- 
form the  lower.  The  one- half  of  the  people  are  forced  to 
labor  for  something  beyond  their  own  brute  wants.  And  it 
is,  here  as  elsewhere,  the  first  step  that  costs.  ^     (§  45.) 

'  Thus  Fo}-bonnais,  Elements  du  Commerce  (1S54)  ^1  3^4>  ^^J^  of  trade  with 
savages :  il  fait  nciUre  dans  ccs  nations  le  go{it  du  snferfa  ct  dcs  commcdiids, 
qui  midtifJie  la  iclianges  ct  leur  donne  le  goUi  du  travail. 

•  In  vcr}'  uncivilized  nations,  among  whom  serfdom  is  not  known,  we  gen- 
erally find  the  slavery  of  woman  and  the  temporary  bondage  of  the  son-in- 
law  in  order  to  secure  the  daughter  in  marriage.  This  is  still  the  case  among 
the  Laplanders.    Klcmfii,  Kulturgeschichte  III,  p.  54.    Slavery  was  unknown 


212  PRODUCTION  OF  GOODS.  [B.  I,  Ch.  IV. 

SECTION  LXIX. 

ORIGIN  OF  SLAVERY.  — WANT  OF  FREEDOM. 

It  is  not  to  be  supposed  that  slavery,  at  this  stage,  is  so 
oppressive  even  to  those  who  have  been  deprived  of  their 
freedom.  The  feeling  of  moral  degradation  which  slavery, 
abstraction  even  made  of  its  abuses,  awakens  in  us,  is  unknown 
in  a  very  uncivilized  age.^  The  child  willingly  obeys  the 
orders  of  strangers,  and  is  hired  out  to  service  by  his  parents 
etc.  The  want  or  craving  for  liberty  keeps  pace  with  the  in- 
tellectual growth  of  a  people.  The  systematic  over-working 
of  servants  or  slaves,  in  the  interest  of  their  masters,  is  scarcely 
thinkable  in  an  uncultured  age,  when,  in  the  absence  of  com- 

among  the  Greeks  in  the  very  earhest  times.  Herod.,  VI,  263.  F.  A.  Wolf, 
Darstell.  der  Afterthumswissenschaft,  iii,  doubts  whether  any  great  advance 
in  the  higher  development  of  the  mind  would  have  been  possible  without 
slavery. 

'  In  Russia,  where  free  peasants  and  serfs  lived  side  by  side,  it  has  been 
remarked  that  the  latter  were  never  so  rich  and  never  so  poor  as  the  former. 
(Kohl,  Reise  durch  Russland  II,  S,  300.)  The  Livonian  peasants  have  be- 
come poorer  since  their  emancipation.  (Cancrin,  CEkonomie  der  mensch- 
lichen  Gesellschaften,  41).  Many  of  the  serfs  refused  to  accept  emancipation. 
(Biisch,  Geldumlauf,  Einleitung,  §  6.)  And  so  Martius,  Reise  in  Brasilien 
II,  553  ff.,  assures  us  that  the  negro  slaves  in  Brazil  are  as  a  rule  a  very 
merry  set.  He  is  also  of  the  opinion  that  they  are  better  clothed,  lodged, 
fed  and  employed  than  in  their  own  country.  For  the  remarkable  official 
defense  of  North  American  slavery  directed  by  Calhoun,  to  Lord  Aberdeen, 
see  the  Allg.  Zeitung,  1S44,  No.  145.  In  this  document,  we  find  a  compari- 
son instituted  between  the  free  negroes  of  the  north  and  the  slaves  of  the 
south.  In  the  north,  there  was  one  deaf-mute,  a  case  of  blindness  and  of  in- 
sanit}'  in  every  96;  in  the  south,  in  every  672;  a  pauper,  invalid  and  prisoner 
in  every  6  at  the  north,  in  every  54  at  the  south.  In  Maine,  -ji^th  of  the 
negroes  were  afflicted  by  disease;  in  Florida,  jyV^th  (.').  The  fiict  that  the 
slave  population  of  the  United  States  increased,  between  1S40  and  1S60,  from 
2,873,698  to  4,441,830,  while  the  free  negro  population  of  Jamaica,  between 
1833  and  1843,  underwent  a  frightful  decrease,  is  to  the  same  purport.  How- 
ever, too  much  must  not  be  inferred  from  all  this,  as  the  negroes  in  America 
are  very  far  from  being  the  children  of  the  soil. 


Sec.  LXIX.]  THE  ORIGIN  OF  SLAVERY.  213 

mercial  intercourse,  every  family  consumes  what  it  produces.^ 
The  only  thing  which  Ihe  slave  has  to  fear  is  an  occasional 
outburst  of  tyranny  on  the  part  of  the  master,  a  thing  which 
is  far  from  unfrequent  in  all  the  relations  of  low  civilizations. 
Fear  restrains  masters  to  a  certain  extent;  for,  in  those  early 
days,  how  few  were  the  institutions  of  state  which  could  pro- 
tect them  aijainst  the  vengeance  of  their  slaves!  ^  * 

*  The  servants  in  the  Odyssey  who  cared  for  hogs  and  cattle  etc.  were  cer- 
tainly in  a  better  condition  in  many  respects  than  the  peasants  of  Attica, 
who  were  free,  but  buried  in  debt  until  the  time  of  Solon.  Concerning  the 
mildness  of  the  treatment  of  slaves  ifi  very  early  Roman  times,  see  Plutarch, 
Coriol.,  24,  and  Cato,  I,  3,  20  fF. ;  Cato,  de  Re  rust,  5,  56  ft'.;  Alacroh.,  Stat.  I, 
10  ff.  On  the  state  of  the  serfs  among  the  Germans,  see  Grimm^  Deutsche 
Rechtsalterthiimer,  p.  339  if. ;  among  the  ancient  Scandinavians  etc.,  Dahl- 
maUy  Geschichte  von  Danemark,  I,  163.     See  Tacit.,  Germ.,  25. 

*  Compare  Landnamabok,  I,  6. 

*  The  opinions  of  the  ancients  for  and  against  slavery  are  found  in  Arist. 
Polit.  I,  2.  See  especially  the  beautiful  passages  in  Philemon  :  Meineke,  Comi- 
corum  jr.,  364,  410.  Aristotle  even  thinks  that  there  are  cases  in  which 
master  and  slave  might  be  brought  together  by  a  mutual  -want,  each  of  the 
other.  The  former  wants  hands  to  execute  the  work  of  his  brain ;  the  latter 
a  guiding  brain  for  his  hands.  Where  the  degree  of  dependence  corresponds 
exactly  to  the  diflerence  of  ability,  Aristotle,  leaving  its  abuses  out  of  the  ques- 
tion, declares  slavery  to  be  just.  See,  also,  Eth.  Nicom.,  VIII,  11.  Similarly 
the  Pythagorean  Bryson  in  Stobceus,  Florid.  LXXXV,  15.  But  Aristotle 
would  hold  up  emancipation  to  all  slaves  as  a  reward  they  might  have  in 
prospect.  Polit.  VII,  9,  9;  OEcon.  I,  5.  It  is  characteristic  of  the  many  testa- 
ments of  philosophers,  found  in  Diogenes  Laeriius,  that  they  contain  declar- 
ations giving  slaves  their  freedom.  The  Essenes  and  Therapeutics  con- 
demned slavery  under  all  circumstances.  Philc,  Opp.  II,  pp.  45S,  4S2, 
Opp.  I.  See  Seneca,  De  Benef.  Ill,  20.  The  Jus  naiurale  of  the  age  of  the 
Caesars  recognized  the  freedom  and  equality  of  man.  Digest,  XII,  664.,  L. 
1 7,  32.  The  New  Testament  does  not  reject  it  absolutely,  but  would  sanctity- 
it  as  well  as  all  other  relations  in  life.  Compare  Luke,  17,  7;  Eph.  6  5  ff. ; 
Coloss.  3,  22 ;  Tit.  2,  9.  More  especially,  I  Timothy,  VI,  i  ft".  It  was  not 
until  the  ninth  century  that  the  opinion  that  slavery  was  anti-Christian  be- 
cause men  were  all  made  in  the  image  of  God,  arose.  Planck,  Geschichte 
der  kirchlichen  Gesellschaftsverfassimg,  II,  350.  Sachsenspiegel,  III,  42. 
A  writer  as  recent  as  Pufendorf  explains  slavery  as  arising  from  a  free  con- 
tract;  _/i;c;V/;«,  tit  dcs.  Jus  naturtc  (1672)  VI,  3.  More  recently  Linguct,  Theorie 
des  Loisciviles  (1767),  V,  ch.  30,  and  Hugo,  Naturrecht,  §  1S6  ft",  have  en- 
deavored to  prove  that  slaves  are  in  a  condition  preferable  to  that  of  poor  free 


214  PRODUCTION  OF  GOODS.  [B.  I,  Ch.  IV. 

SECTION  LXX. 

EMANCIPATION. 

As  States  grow  greater  and  men's  manners  gentler,  the  ranks 
of  slavery  are  less  and  less  liable  to  be  recruited  through  the 
agency  of  war.^  It  then  becomes  necessary  to  have  recourse 
to  the  family  to  keep  up  their  number,  which  makes  their 
condition  much  more  endurable,  and  which  supposes  that  it 
has  been  made  more  endurable  in  other  respects  beforehand. 
jNIodern  states,  are,  as  a  rule^  larger  than  the  anci-ent  were. 
The  Gei"mans  had,  long  before  the  time  of  Charlemagne, 
treated  prisoners  of  war  of  German  origin  more  mildly  than 
those  of  Gallic  or  Slavic  origin.^  The  condition  of  the  latter 
even  improved  from  the  time  that  nations  began  to  think  of 
making  permanent  conquests.  Since  the  Slavic  wars  of  the 
tenth  century,  certainly  since  the  Lithuanian  contests,  it  seems 
that  prisoners  of  war  were  not  reduced  to  slavery.^     Chivalry, 

men.  And  so  Moser  Patriot  Phantasien,  IIvP-  154,  seq.  Those  who  with 
Thaer  separate  the  element  of  production,  "  labor"  from  that  of  "  inteUigence," 
justify  slavery  on  the  same  principle  that  Aristotle  did,  without  knowing  it. 
Per  contra,  see  F.  G.  Schultze^  N.  CEkonomie  (1856),  418. 

'  Turgot^  Sur  la  Formation  etc.,  §  21.  The  universal  empire  of  the  Ro- 
mans demonstrated  this.  Then  it  was,  for  instance,  that  during  the  wars  of 
Lucullus,  a  slave  cost  only  four  drachmas.  {Aj>J>ian.,  Bell.  Mithr.,  78.)  Sar- 
di  venules:  on  account  of  the  glutting  of  the  market  with  Sardinian  slaves, 
made  through  the  victory  of  Tib.  Gracchus,  177,  before  Christ.  Many  of  the 
lesser  wars  of  the  Romans  can  be  looked  upon  only  as  slave-hunts.  But  the 
great  wars  also  were  followed  by  uprisings  of  slaves  on  account  of  the  many 
new  slaves  which  they  made.  Thus  198  in  Latium,  196  in  Etruria.  {Bilcher., 
Aufstande  der  unfreien  Arbeiter  von,  143-129,  v.  Chr.,  1874.)  During  the 
relatively  peaceful  periods  which  preceded  many  of  the  Roman  revolutions, 
pirates  delivered  over  great  masses  of  slaves.  It  frequently  happened  that 
several  thousand  slaves  were  led  to  Delos  and  sold  in  a  single  day.  (Sirabo, 
XIV,  668.)  As  emancipation  was  a  measure  which  people  could  not  make 
up  their  minds  to  adopt,  these  pirates  satisfied  a  "want"  for  a  time,  and  this 
partly  explains  the  otherwise  incomprehensible  forbearaece  of  tlie  state  to- 
wards them. 

^  Greg  or.    Turoii.,  Ill,  15. 

*  Grimm,  D.  Rechtsalterthiimer,  323.     It  is  a  strange  fact  that  prisoners  of 


Sec.  LXX.]  EMANCirATION.  215 

and  allowing  prisoners  to  go  free,  on  their  word  of  honor, 
contributed  largely  to  this  result. 

The  more  productive  agriculture  is,  the  more  numerous  the 
wants  of  land  owners,  the  more  extensive  the  division  of  labor 
and  commercial  intercourse  become,  the  easier  it  is  for  a  large 
class  of  the  community  to  obtain  support  for  themselves  and 
families  without  cultivating  land  of  their  own.  (Wages.) 
When  exchanges  through  the  medium  of  money  become  cus- 
tomary, the  chief  argument  for  slavery  disappears;  and  the 
strong,  rich  and  able  man  can,  without  having  recourse  to 
force,  command  the  labor  of  other  men.  Every  further  ad- 
vance in  economic  culture  must  necessarily  help  forward  in  this 
direction.  Thus,  without  the  plow,  for  instance,  we  should  all 
be  really  only  so  many  glehce  adscri^ti.  It  is  due  especially  to 
the  ever  increasing  perfection  of  tools,  machines  and  opera- 
tions, that  the  slave  of  antiquit}"  was  transformed  into  the  serf 
of  the  middle  ages,  and  afterwards  into  the  day  laborer  of 
modern  times.*  It  is  more  particularly  to  be  remarked,  that 
machines,  since  1750,  "first  made  the  constitutional  liberty  of 
many,  instead  of  the  feudal  freedom  of  a  few,  possible." 
{ScJiafflc>j 

war  were  in  several  remarkable  instances  sold  as  slaves  in  Italy  during  the 
fifteenth  century.  {Sismoudi^  Hist,  des  Republiques  italiennes,  IX,  p.  312 
seq.;  XI,  p.  13S  seq.)  And  even  in  the  sixteenth  century,  the  pope  allowed 
those  of  states  opposed  to  him  to  be  treated  in  this  way.  Stsinoiidi,  sup-a, 
XI,  251 ;  XIII,  4S5.     Raynold,  Ann.  eccl.,  1506,  §  25  ff. 

*This  graduation  of  slave,  serf  and  workman,  has  been  carried  out  espe- 
cially by  Saint  Simon,  Oeuvres,  328  ff.  Even  Proudhon  admits  tliat  the  con- 
dition of  the  lower  classes  is  better  now  than  formerlv.  (Conti-adictions 
economiques,  ch.  X,  2.)  Compare  M.  Chevalier,  Cours,  I.  Le90ns  i  and  2, 
where  he  shows  that  our  productive  power  has  increased  during  the  last  four 
or  five  centuries  in  the  production  of  iron  in  the  proportion  of  i  to  from 
25  to  30;  in  the  preparation  of  flour  since  the  time  of  Homer  in  the 
proportion  of  i :  144;  in  the  production  of  cotton  during  the  last  70  years  in 
the  proportion  of  i :  320.  Aristotle  predicted,  long  ago,  that  "  when  the  shuttle 
would  move  of  itself,  and  plecfa-a  of  themselves  strike  the  lyre,  we  should 
need  no  more  slaves."  Polit.,  2,  5.  Every  step  of  true  progress  brings  us 
nearer  the  fulfillment  of  the  prophecy. 


216  PRODUCTION  OF  GOODS.  [B.  I,  Ch.  IV. 

SECTION  LXXI. 

DISADVANTAGES  OF  SLAVERY. 

Slavery  promotes  the  division  of  labor  only  in  the  very 
beginning.  The  more  dependent  the  slave  is,  the  worse  he 
works.  Whatever  he  spoils  or  allows  to  go  to  waste  injures 
only  his  master.  Hence  it  is  that  slave-husbandry  is  only  one 
degree  removed  from  what  the  Germans  call  Raiibbaii^  and 
which  means,  as  nearly  as  we  can  translate  it,  the  most 
thoughtless  and  wasteful  management  possible.^  Whatever 
he  consumes  is  simply  so  much  gain  to  himself.  Industry 
and  skill  are  injurious  to  him,  because,  if  remarkable  for  these 
qualities,  his  master  exacts  more  work  from  him  and  is 
more  adverse  to  setting  him  at  liberty.  Instead  of  the  num- 
berless incentives  of  the  free  workman:  care  for  the  future, 
for  his  family,  honor  and  comfort,  the  slave  is  generally 
moved  by  one  —  the  fear  of  ill-treatment,  and  to  this  he  grad- 
ually becomes  insensible.'  The  division  of  labor  demanded 
by  manufactures,  and  which  is  to  be  found  for  the  most  part 
only  where  each  person  is  at  liberty  to  choose  his  own  avo- 
cation, is  scarcely  supposable  where  slavery,  in  the  strict  sense 
of  the  word,  prevails.  The  same  is  true  of  the  spirit  of  inven- 
tion and  improvement.^     And  even  where  the  milder  glebcB 

'  The  North  American  planters  employed  coarse  tools  rather  than  fine 
ones,  mules  rather  than  horses,  because  their  slaves  took  so  little  care  of 
them. 

2  It  can  never  obtain  as  much  labor  from  the  slave,  as  the  fear  of  losing 
his  situation  and  of  not  being  able  to  obtain  another,  will  from  the  free 
workman.  (Hume.)  Afarlo,  Weltcekonomie,  1S4S,  I,  2,  38,  grants  this  to 
be  true  only  where  all  the  forces  of  nature  are  appropriated  by  occupation, 
and  the  number  of  workmen  is  greater  than  the  want  of  workmen. 

2  Even  in  Brazil,  only  free  men  are,  as  a  rule,  employed  as  sugar  refiners, 
distillers,  teamsters  etc.  (Kostcr,  Travels  in  Brazil,  1S16,  362.)  StorcJi, 
Russland  unter  Alexander  I,  Heft,  23,  p.  255,  cites  the  opinion  of  an  eminent 
Russian  manufacturer,  that  it  would  first  be  necessary  to  liberate  the  serf 
factory-hands.  Masters  have  generally  give^i  up  employing  their  own  serfs 
in  manufactures,  allowed  them  to  seek  work  for  themselves,  and  only  re- 


Sec.  LXXI.]       DISADVANTAGES  OF  SLAVERY.  217 

adscriftio  obtains,  the  division  of  labor  is  much  hindered. 
Hence,  competent  judges  all  agree  on  the  badness  of  slave 
labor  ;^  which,  as  for  instance  in  the  United  States,  was  used 
only  where  the  slaves  were  crowded  together  in  large  num- 
bers and  could  therefore  be  easily  superintended.  And  not 
only  are  the  slaves  themselves  indolent,  but  their  masters  as 
well;  more  particularly  in  slave  countries  where  all  labor  is 
considered  disgraceful.  What  must  be  the  national  husbandry 
of  a  people,  one  half  of  whom  refuse  to  do  anything  that  is  right 
and  proper,  through  malice,  and  the  other  half  through  pride ! 
As  soon  as,  on  account  of  increased  population  and  conse- 
quent increased  consumption,  this  enormous  waste  of  force 
can  be  endured  no  longer,  free  workmen  become  more  profit- 
able, not  only  to  themselves  and  to  the  whole  community,  but 
to  the  greater  number  of  the  individuals  who  compose  it.^ 
On  the  Bernstoff  estates  the  quantity  of  rye  harvested  before 


quired  them  to  pay  them  a  species  of  tax.  When  this  plan  was  adopted,  it 
Avas  found  that  they  worked  much  better,  (v.  Haxthausen,  Studien  I,  6i, 
1 16.)  It  was  a  consequence  of  slavery  that,  in  antiquity,  the  very  wealthy 
purchased  so  little:  omnia  domi  nascuntur !    (Pctron.^  3S.) 

■*  Thus  Homer,  Od.  XVII,  322,  in  whose  time  even  there  were  day  laborers, 
"d^YiTB^  or  eqt&oc.  (Od.  IV,  644;  X,  85;  XI,  490;  XIV,  102.  //c5w^,  Opera, 
602.)  And  Varro,  De  Re  rust.  I,  17,  advises  that  difficult  labor  should  be 
performed  rather  by  day  laborers.  Colt  rtira  ab  ergastulis  fessununi  est  et 
qm'dquid  agitur  a  desfcrantibus.  Plin.,  H.  N.  XVIII,  7.  Omne  genus  agri 
tolcrabiliiis  sub  liberis  colo?tts,  quam  sub  villicis.  (Columella,  De  Re  rust  I,  7.) 
It  has  been  estimated,  that,  in  the  West  Indies,  a  negro  slave  performed  only 
one-third  of  the  work  performed  by  an  Englishinan  in  his  own  country. 
(B.  Edtvards,  History  of  the  British  West  Indies,  II,  131.)  During  the  one 
afternoon,  in  every  week,  in  which  the  negroes  were  allowed  to  work  on 
their  own  account,  they  accomplished  as  much  as  on  other  entire  days. 
Edinburgh  R.  IV,  842.  Compare  Bentham,  Traitd  de  Legislation  I,  319. 
Ch.  Comte,  Traite  de  Legislation,  1827,  Livre  V.;  Cairnes,  The  Slave-Power, 
its  Character,  Career  and  probable  Designs,  1862;  Olmsted,  Journeys  and 
Explorations  in  the  Cotton  Kingdom,  1861. 

5  While  the  older  tyrants  had  prohibited  idleness,  Draco  and  Solon  even 
under  pain  of  degradation  (see  places  in  BuchscnschUtz,  Besitz  und  Erwerb, 
260).  Socrates  called  the  dpfta  the  sister  of  Freedom  (Aelian,  V.  H.  X, 
14),  and  the  ay.o}y]  the  most  beautiful  of  all  professions 


218  PRODUCTION  OF  GOODS.  [B.  I,  Ch.  IV. 

and  after  emancipation  was  as  3:8j^;  of  barley-corn  as  4:9^^^; 
of  oat- grain  as  2^:8.^ 

The  owners  of  serfs,  especially,  are  apt  to  be  very  wasteful 
of  their  labor,  because  they  imagine  that  they  obtain  it  gratis. 
Tucker  has  made  a  curious  calculation  tending  to  show  that 
when  civilization  reaches  a  certain  point,  the  master's  self-in- 
terest leads  to  emancipation.  In  Russia,  where  there  are 
seventy-five  persons  to  the  English  square  mile,  it  seemed  to 
him  that  serfdom  was  still  a  good  economic  speculation.  In 
western  Europe,  where  there  were  one  hundred  and  ten  per- 
sons to  the  square  mile,  freedom,  in  all  relations  of  master  and 
servant,  he  considered  more  advantageous  to  all  parties.  Eman- 
cipation began  in  England  in  the  fourteenth  century,  when  that 
country  had  a  population  of  forty  to  the  square  mile,  and  was 
completed  in  the  seventeenth,  when  the  population  was  ninety- 
two  to  the  square  mile."'  Tucker  concludes,  that  the  turning 
point  comes, when  the  population  is  relatively  to  the  number 
of  square  miles  as  66:  i.^  Such  a  calculation  cannot,  of  course, 
be  universally  true.  The  free  workman  can  usually  command 
a  much  larger  portion  of  the  sum  total  of  economic  profits 

*  B.  Franklin,  Observations  concerning  the  Peopling  of  New  Countries 
etc.,  1751. 

'Monument  erected  to  Bernstorjfhy  his  peasants,  8,  15.  The  Zamoisl-t 
estates  yielded,  17  years  after  emancipation,  three  times  as  much  as  they  did 
when  serfdom  prevailed.  Coxe,  Travels  in  Poland,  I,  22.  The  transformation 
of  the  serfs  into  hereditary  farmers  cost  Count  Bernstorf  100,000  thalers; 
but  the  revenue  derived  from  his  lands  increased  in  consequence,  in  twenty- 
four  years,  from  3,000  to  27,000  thalers.  An  English  mower  can  mow  a 
field  two  and  three  times  as  gi-eat  as  a  Russian  mower  in  a  given  time.  If 
the  former  receives  daily  wages  equivalent  to  seventy  pounds  of  wheat,  and 
the  latter  to  only  twelve,  the  Englishman's  labor  is  still  the  cheaper;  for  he 
turns  out  100  pounds  of  hay  while  the  latter  turns  out  only  eight.  Jacob, 
43  seq.  But  the  hiring  out  of  serfs  in  the  large  cities  of  Russia  yielded  less 
to  their  masters  than  in  the  interior.     Storch,  Handbuch,  II,  286. 

8  Tucker,  Progress  of  the  United  States,  1843,  pp.  iii  ff.  We  need  not  call 
attention  to  the  inaccuracy  of  these  figures,  nor  remark  how  little  servicea- 
ble for  our  present  purpose  an  average  obtained  from  the  density  of  popula- 
tion in  different  parts  of  Russia,  where  such  densities  are  themselves  so  very 
different,  would  be. 


Sec.  LXXII.]        CIVILIZATION  AND  SLAVERY.  219 

than  can  the  slave  or  serf,  who  must  be  satisfied  with  the  min- 
imum necessary  to  support  life.^  Hence,  free  labor  is  more 
profitable  to  masters  only  when  production  in  general  is  so 
much  enhanced  thereby  that  a  greater  quantity  of  goods  falls 
to  their  share  also.  But  this  will  always  be  the  case  where 
workmen  are  capable  of  development.^" 


SECTION  LXXII. 

EFFECT  OF  AN  ADVANCE  IN  CIVILIZATION  ON  SLAVERY. 

At  the  same  time,  the  same  degree  of  servitude  becomes 
more  and  more  oppressive  to  the  bondman  as  civilization  ad- 
vances. The  greater  his  intellectual  progress,  the  more  does 
he  feel  the  want  of  liberty,  and  the  more  keenly  he  experiences 
the  degradation  of  his  condition.  The  development  of  luxury 
digs  a  gulf  between  master  and  servant  which  grows  wider 
every  day.  (§  227  ff.)  As  commerce  extends,  it  becomes 
more  profitable  for  the  master  to  exact  excessive  work  from 
his  slave.  In  the  West  Indies,  it  was  a  problem  which  every 
slaveholder  solved  for  himself,  whether,  by  immoderately  in- 
creased production,  which  cost  the  lives  of  many  slaves,  the 
gain  in  sugar  was  greater  than  the  loss  occasioned  by  the 


3  The  Spartans  seemed  to  have  counted  on  an  adult  free  man  for  twice  as 
much  coarse  food  as  a  bondsman.     (Thucyd.^  VI,  16.) 

1*  Stcxvar-t,  Principles,  I,  7,  in  accordance  with  historical  data,  says,  that 
the  peasantry  in  our  days  work  for  other  people,  because  they  have  wants 
which  can  be  satisfied  only  in  this  way ;  because  "  they  are  slaves  of  their 
own  wants."  The  unquestionable  superiority  of  free  to  slave  labor,  in  point 
of  economy,  has  been  dwelt  upon  especially  by  Turgot,  Sur  la  Formation  et 
la  Distribution,  §  28,  and  by  Adam  Smith,  Wealth  of  Nations,  I,  S,  III,  2. 
But  see  J.  B.  Say,  Traitd,  I,  ch.  19,  and  Storc/i,  Handbuch,  II,  1S4.  When 
Hume,  Discourses,  No.  11,  Populousness  of  ancient  Nations,  demonstrates 
the  greater  cost  of  slavery  from  the  fact  that  the  master  of  slaves  must  either 
breed  or  buy  them,  he  forgets  that  in  the  case  of  free  workmen  he  is  obliged 
to  provide  also  for  the  support  of  the  workman's  children.  Only,  the  slave- 
holder has,  indeed,  to  advance  the  whole  at  once. 


220  PRODUCTION  OF  GOODS.  [B.  I,  Ch.  IV 

consequent  death  of  the  negroes.  ^  When,  with  the  advance  of 
civilization,  the  state  guaranties  to  all  more  certain  protection 
of  their  rights  than  they  enjoyed  in  a  less  advanced  stage  of 
social  improvement,  the  last  check  on  masters,  the  fear  of  the 
vengeance  of  their  slaves,  is  removed.^  Demoralization  natu- 
rally increases  in  the  same  proportion ;  and  that  of  the  master 
as  well  as  that  of  his  servants.  ^ 

SECTION  LXXIII. 

THE  SAME  SUBJECT  CONTINUED. 

This  explains  why  it  is  that,  in  all  countries,  the  power  of 
the  state,  in  a  period  of  transition  towards  a  higher  civiliza- 
tion, has  endeavored  to  render  slavery  milder.  Great  credit  is 
due  the  Church  in  this  regard.  It  soon  extinguished  slavery 
entirely  in  Scandinavia,^  and  in  portions  of  Europe  it  abolished 
at  least  the  sale   of   prisoners   to   foreign  countries."      The 

^  Hutnboldf,  Cuba,  I,  177.  Aslnvortk,  Tour  in  the  U.  S.  Cuba  and  Canada, 
iS6r.  The  slaves  in  Louisiana  were  so  overworked  that  they  Hved,  on  an 
average,  scarcely  seven  years.  Edinburg  Rev.,  LXXXIII,  73.  Even  the 
Stoics  were  not  agreed,  whether  it  was  right,  in  case  of  shipwreck,  to  sacri- 
fice a  cheap  slave  in  order  to  save  a  valuable  horse.  (Cicero,  de  Oif.  Ill,  23.) 
Whether  the  self-interest  of  masters  is  an  inducement  to  the  mild  treatment 
of  their  slaves  depends  on  the  price  for  which  fresh  slaves  may  be  obtained. 
This  is  a  strong  reason  why  a  high  degree  of  civilization,  where  there  are 
not  counteracting  influences,  must  make  slavery  less  endurable.  The  more 
valuable  slaves  are,  the  worse  is  their  condition.  In  the  unfertile  Bahamas, 
the  price  was  £21;  in  Demarara,  £86.  In  the  former  place  they  were  re- 
quired to  do  little  work  and  were  well  fed  and  well  clothed.  Hence  their 
numbers  have  increased  there,  while  in  Demarara  they  have  decreased. 
(Edinburgh  Rev.,  XLVI,  496,  iSo.) 

2  Proverb:  quot  servi  totidem  liostcs.     (Macfob.,  Sat.  I,  11,  13.) 

3  ycfferson,  Notes  on  Virginia,  212.  The  chastity  of  both  parties  especially 
suffers.  The  letio  of  ancient  comedy  was  a  slave  trader!  Compare  L.  27, 
Digest,  V,  3.  In  the  English  negro  colonies,  it  was  not  unusual  for  the 
guests  of  the  planters,  even  in  the  best  families,  on  retiring,  to  ask  the 
accompanving  servant  for  a  girl,  with  as  little  concern  as  they  would  in  En- 
gland for  a  light.     (Negro  Slavery,  or  a  Creed  of that  state  of  Society  as 

it  exists  in  the  United  States  and  in  the  Colonies  of  the  West  Indies,  Lon- 
don, 1S23,  53.) 

1  Even  the  law  of  Upland  forbade  the  sale  of  Christians.    The  children  of 


Sec.  LXXIIL]        THE  CHURCH  AND  SLAVERY.  221 

Concilium  Agailieiisc,  in  the  year  506,  decreed  that  serfs  should 
not  be  killed  by  their  masters  at  pleasure,^  but  that  they  should 
be  brought  before  a  tribunal  of  justice.  (The  manorial  tribu- 
nals of  more  recent  times.)  Moreover,  the  numberless  holi- 
days of  the  church  operated  greatly  in  favor  of  the  bondmen. 
Pope  Alexander  III.  recommended  their  gradual  emancipa- 
tion.^ One  of  the  principal  steps  in  the  way  of  progress  was 
made  when  they  could  no  longer  be  sold  singly,  but  only  with 
the  village  or  on  the  estate  to  which  they  belonged.^  The 
feudal  aristocracy  improved  the  condition  of  the  bondmen  by 
reducing  a  great  number  of  freemen  to  their  level.^     This 

a  slave  and  of  a  free  person  -were  born  free.  Emancipation  ^vas  considered  a 
Christian  act,  to  be  performed  for  "the  salvation  of  one's  soul."  Voluntary 
slavery  was  prohibited  in  1266,  and  Magnus  Erichson  forbade  slavery  gener- 
ally from  the  year  1335.  See  Gcijcv,  Geschichte  von  Schweden,  pp.  157,  185, 
273.     Estruj>,  in  Falcks  N.  Staatsburg  Magazin,  1837,  179,  fl". 

*L.  Alam,  137,  i.  L.  Fris.,  17,  5.  Decree  of  960  concerning  the  aboli- 
tion of  the  trade  in  Christian  slaves  between  Germany,  Italy  and  the  Byzan- 
tine Empire.  Tafel  nnd  Tltomas^  Urkunden  der  Staats-und  Handelsgesch- 
ichte  von  Venedig,  I,  18  ft". 

3  Tacit.  Germ.  25.  In  the  Legg.  Wallire  206  (Wolton)  we  read :  "  Hero 
eadem  fotestas  in  serviiin  smwt  ac  in  juinentumr 

4  The  council  of  London  in  1 102  forbade  men  to  be  sold  like  beasts.  (Con- 
cil.,  ed.  Venet.  1730,  XII,  iioo,  No.  27.)  Gudrard,  Polyptiques  d'lrminon, 
Prolegg.,  220,  describes  a  pedagogical  model  emancipation  by  the  Church  of 
its  own  serfs.  On  the  whole,  the  church  contributed  more  towards  the  eman- 
cipation of  the  serfs  of  others  than  of  its  own.  See  ch.  39,  C.  XII,  qu.  2 ;  c. 
3,4;  De  Rebus  eccl. 

5  In  Flanders  since  the  end  of  the  twelfth  century.  Warnl-oni^,  Fland- 
rische  Staats  und    Rechtsgeschichte  (I,  244). 

*  In  what  relates  to  Germany,  compare  SuffenJtcim,  Geschichte  der  Aufhe- 
bung  der  Leibeigenschaft  in  Europa,  1861,  p.  350  ft".  The  destruction  of  the  old 
manorial  system  (Hofxvesot)  in  the  fifteenth  and  sixteenth  centuries,  was 
often  unfavorable  to  bondmen  and  favorable  to  serfs.  Maiircr,  Gesch.  der 
Frohnhofe,  II,  92.  In  Poland,  where  all  were  originally  equal  land-owners, 
many  sank  gradually  through  poverty  to  the  condition  of  the  so-called 
kmetes,  who,  although  personally  free,  were  not  very  far  removed  from  slaves. 
Beginning  Avith  the  thirteenth  century,  a  great  number  of  immunities,  after 
the  model  of  those  accorded  in  Germany,  were  granted,  by  means  of  which 
they  lost,  for  the  most  part,  their  direct  subjection  to  the  emperor  and  the 
empire  alone.    This  was  soon  followed  as  a  consequence  by  their  personal 


222  PRODUCTION  OF  GOODS.  [B.  I,  Ch.  IV 

could  not  be  effected  without  a  real  amelioration  of  slaver}^; 
and,  later,  when  the  feudal  aristocracy  declined,  the  older  serfs 
were,  with  those  who  had  been  formerly  free,  raised  from  their 
abject  condition.  The  sense  of  chivalry  would  not  permit  a 
lord  to  be  served  by  a  bondman.  The  old  adage  "  the  serf 
lives  to  serve  and  serves  to  live,"  by  degrees,  lost  its  force. 
Serfs  were  required  to  perform  certain  tasks  on  the  lands  of 
their  master  and  to  pay  him  a  certain  quantity  of  the  produce 
of  their  own.  Heriots  (mortjiarhmi),  which  became  usual 
from  the  8th  century  (y.  Grimm )^  may  be  considered  evi- 
dence that  even  bondmen  were  permitted  to  acquire  and  hold 
property  in  their  own  right.  Thus  was  one  of  the  chief  dis- 
advantages of  slavery,  in  an  economic  sense,  removed.'^  It 
may  be  affirmed,  as  characteristic  of  the  aristocracy  of  feudal 
times,  that  they  treated  those,  who  like  the  serfs  were  entirely 
at  their  mercy,  with  much  more  consideration  than  those  who 
were  free,  and,  although  dependent  on  them,  had  certain  rights 
guarantied  by  contract.      The  absolute  monarchy  found  in 

oppression.  (Ropell,  Geschichte  von  Polen,  I,  p.  30S  seq.,  and  p.  570  seq.) 
In  Bohemia,  the  old  form  of  serfdom  had  so  far  disappeared  in  the  fourteenth 
century,  that  it  might  be  said  it  was  known  only  to  history.  But  during  the 
reign  of  the  weak  king,  Ladislaus  II,  a  new  species  of  serfdom  came  into 
vogue,  the  result  of  the  preponderance  of  the  aristocratic  element.  Palacky^ 
Gesch.  von  Bohmen,  II,  p.  33  seq.;  Ill,  31  seq.  Aristocratic  Denmark,  be- 
fore the  peasant  war  of  1255-1258,  subjected  the  free  peasantry  who  had  been 
leaseholders  for  a  term  of  years  to  unlimited  socage  duty.  Waldemar  III, 
reduced  to  the  same  kind  of  service  the  land-owning  peasantry,  which  es- 
pecially from  the  date  of  Margaret's  reign,  developed  into  a  species  of  gle- 
icp  adscriftto.  From  the  sixteenth  century,  Avhen  the  royal  power  almost  dis- 
appeared, these  public  privileges  were  abandoned  to  the  nobility  to  such  an 
extent  that,  in  1650,  there  were  scarcely  5,000  free  peasants.  Dalilmaini,  III, 
p.  73  seq.  However  the  sevei-ity  of  traeldom  made  way  in  the  fourteenth 
century  for  the  vornedskaf  (modified  bondage),  a  milder  species  of  vassalage. 
See  Koldcrup  Rosenvinge,  Grundriss  der  danischen  Rechtsgeschichte,  §  94. 

'  The  French  expression  mainmorte  comes  originally  from  the  deprivation 
of  the  right  of  inheritance.  In  Beaumanoir's  time,  12S3,  it  was  customary, 
after  a  number  of  serfs  had  lived  together  for  a  year  and  a  day,  for  their 
chattels  movable  to  become  the  common  property  of  the  community. 
(Warnkomg,  Franzosische  Rechtsgeschichte,  II,  157.) 


Sec.  LXXIII.]      THE  CHURCH  AND  SLAVERY.  223 

nearly  all  nations,  at  the  opening  of  modern  times,  was  forced 
by  its  struggle  with  the  mediaeval  aristocracy  to  favor  the 
emancipation  of  the  serfs  and  of  the  lower  classes.  Even  in 
Russia,  Iwan  III.  (1462-1505)  seems  to  have  restored  to  the 
peasantry  the  right  of  migration,  of  which  they  had  been  de- 
prived by  the  invasion  of  the  Mongols,  nor  did  they  lose  it 
again  until  the  great  troubles  at  the  beginning  of  the  seven- 
teenth century,  which  gave  the  ruling  power  to  the  nobility.^ 
Where  civilization  has  reached  its  highest  development,  the 
irresistible  power  of  public  opinion,  governed  by  the  ideas  of 
the  universal  brotherhood  of  man  and  of  democratic  equality, 
causes  the  abolition  of  all  irredeemable  and  of  all  hereditary 
relations  of  servitude  .^  ^^  ^' 


*  In  France,  Louis  X.  made  it  a  fiscal  speculation  to  sell  serfs  their  liberty 
in  whole  districts,  even  against  their  will.  His  edict,  Ordonnances,  I,  583, 
recognizes  that  all  men  are  by  nature  free,  and  that  France  is  not  without 
reason  called  the  land  of  the  Franks  etc.  Even  in  129S,  Philip  IV.  had  ex- 
changed the  serfdom  to  the  crown  of  several  provinces  for  a  land  duty.  The 
last  ruler  of  Dauphiny  gave  all  the  serfs  of  the  crown  their  liberty  gratis,  in 
1394.  (Sugenheim^  p.  130.)  When  the  so-called  coutitiiies  were  written,  there 
were  only  nine  provincees  in  Avhich  by  local  law  serfdom  was  permitted. 
The  defeat  of  the  jacquerie  injured  the  cause  of  emancipation  in  France  in 
the  same  way  that  the  suppression  of  the  war  of  the  peasants  did  in  Ger- 
many. About  1779,  mainmorte  was  abolished  in  all  lands  of  the  crown,  and 
its  proof  made  almost  impossible  in  all  others.  (Wanikdiiig,  II,  151  seq.) 
Yet  it  is  said  that  there  were  150,000  serfs  de  corps  in  France  in  17S9.  (Cos- 
sagfiac,  Causes  de  la  Revolution,  III,  li.)  Koloman,  who  died  in  11 14,  for- 
bade the  slave  trade  in  Hungary,  and  labored  to  raise  all  Christian  slaves 
to  conditionarii  (renters).  But  the  right  of  migration  was  abolished  in  1351. 
King  Sigismund,  and  still  more,  Matthias  Corvinus,  restored  it,  after  the 
suppression  of  the  war  of  the  peasants,  but  in  1514  it  was  again  lost  until 
1586.     Further  progress  was  aiTested  until  the  Urbarium  of  Maria  Theresa. 

9  In  Italy,  Frederick  II.  liberated  all  the  serfs  of  the  crown.  (Constitutt. 
Regni  Sicil.,  164.)  A  model  instance  of  emancipation  at  Bologna  in  1256. 
The  serfs  of  the  state  were  simply  set  at  liberty ;  the  freedom  of  those  of 
private  persons  Avas  purchased  Avith  the  money  of  the  state,  and  a  small 
corn-tithe  laid  on  the  emancipated  as  a  compensation  for  the  expense  in- 
curred in  their  behalf.  In  the  future,  there  Avas  not  to  be  a  bondman  on 
Bologna  territory.  The  motives  which  led  to  this  measure  are  a  strange 
admixture  of   Christianity  and  Democracy.      (Muzzt^  Annali  di  Bologna, 


224  PRODUCTION  OF  GOODS.  [B.  I,  Ch.  IV. 

SECTION  LXXIV. 

THE  SAME  SUBJECT  CONTINUED. 

It  cannot  be  doubted,  that  an  entirely  direct  leap  from  com- 
plete servitude  to  complete  freedom  may  be  attended  by  many 

1S40,  I,  479.)  Italy,  at  the  end  of  the  fourteenth  century,  was  entirely  free 
from  Christian  serfdom.  (Miii-atori,  Antt.  Ital.,  I,  79S.)  In  the  canton  of 
Berne,  Switzerland,  slaverj*  was  gradually  abolished,  the  process  commenc- 
ing about  the  beginning  of  the  fifteenth  century.  It  continued,  however, 
in  the  case  of  ordinary  masters  until  1798.  Sugenheim,  p.  530  seq.  In 
England,  Alfred  the  Great's  eftbrts  towards  the  gradual  abolition  of  slavery 
(  Wilkins,  Leges,  29)  remained  without  result.  The  steps  taken  by  William 
I,  towards  a  much  narrower  end,  however,  seem  to  have  been  more  success- 
ful. (Leges  Will.  Conq.,  225,  229;  Turner,  Hist,  of  England,  I,  135.)  From 
the  time  of  the  Norman  conquest,  prisoners  of  war  ceased  to  recruit  the 
ranks  of  slavery.  Under  Henry  III  and  Edward  I,  socage  tenants  became 
more  and  more  frequent;  but,  before  long,  their  duties  became  less  onerous, 
and  might  be  discharged  by  others  hired  for  the  purpose,  instead  of  by  them- 
selves. The  first  remarkable  vestige  of  a  class  working  for  wages  is  met 
with  in  the  law  of  1351,  which  may  be  considered  an  effort  made  by  the 
nobility  to  opjfose  the  tendencies  in.  favor  of  emancipation,  which  were  a 
consequence  of  the  development  of  cities.  (Eden,  State  of  the  Poor,  I,  7, 
12,  30,  41,)  Infra,  §  175.  Although  the  peasant  war  under  Wat  Tyler  and 
Straw,  who  wished  to  abolish  servitude  at  a  blow,  failed  of  its  object,  we  find 
that  there  were  a  gi-eat  many  instances  of  emancipation  by  individuals  in  the 
fourteenth  and  fifteenth  centuries  when  death  or  sickness  overtook  them,  in 
which  they  declared  the  moral  unfitness  of  slavery.  (Wycliffe:  "When 
Adam  dalve  and  Eve  span,  who  was  then  the  gentleman.?")  Elizabeth  lib- 
erated the  last  serfs  of  the  crown.  Compare  12  Charles  II,  ch.  24,  1660. 
Emancipation  in  the  lowlands  of  Scotland  was  completed  in  1574.  (Tytler, 
Hist,  of  Scotland,  II,  260.) 

'"  Modern  Emancipation  Laws:  in  Pru&sia,  1719,  1S07,  1S19;  Lausitz;  1S20, 
Westphalia;  in  Austria,  1781  (Bohemia  and  Moravia),  1782  (other  German 
countries  and  Galicia);  1785  (Hungaria);  Schleswig-Holstein,  1804,  after 
many  of  the  landed  gentry  had  voluntarily  emancipated  their  own  serfs;  in 
Bavaria,  in  180S;  in  the  kingdom  of  Westphalia,  in  180S;  in  Hessen-Darm- 
stadt,  in  i8ii;  in  Wiirttemberg,  in  1S17;  in  Baden,  in  17S3,  1820  in  newly 
acquired  countries;  in  Mecklenburg,  in  1820;  in  the  kingdom  of  Saxony,  in 
1832;  in  Hano\«er,  in  1833.  The  laAV  of  1702,  abolishing  sei-fdom  in  Den- 
mark, was  evaded  until  17SS,  and  in  part,  even  until  iSoo  bv  the  Schollband 


Sec.  LXXIV.]  EMANCIPATION.  225 

evils.  No  man  is  "  born  free,"^  but  only  with  a  faculty  for 
freedom;  but  this  faculty  must  be  developed.  The  knowl- 
edge and  respect  for  law,  and  the  self-control,  which  are  the 
conditions  and  limits  of  freedom,  are  never  acquired  without 
labor,  seldom  without  the  making  of  grave  mistakes,  and  never 
except  through  the  practice  of  them,.  As  a  rule,  both  parties, 
masters  as  well  as  servants,  would  like  to  get  rid  immediately 
of  all  the  inconveniences  of  the  former  condition  and  yet  con- 
tinue to  enjoy  its  advantages.  The  servant,  for  instance,  will 
now  yield  no  more  the  specific  obedience  of  former  times,  but 
demands  still  specific  mildness  from  the  land-owner,  or  loaner 
of  capital,  his  former  master.  It  is  inevitable  that  there  should 
be  complaints  on  both  sides.-  But  in  the  higher  stages  of  eco- 
nomic culture,  the  relation  of  paternal  protection  and  childlike 

(clod-bond)  introduced  in  its  stead.  The  only  Christian  people  in  Europe, 
Avho,  until  recently,  kept  serfs,  was  the  Russian.  The  serfs  of  Russia,  in 
1S34,  numbered  22,000,000,  i.  e.,  about  40  per  cent,  of  the  entire  population 
In  the  meantime,  the  law  of  FebruarA'-  19,  1S61,  passed  after  four  years  of 
preparation,  fixed  the  date  of  emancipation  at  the  beginning  of  the  year  1S63. 
Slavery  has  been  abolished  in  the  United  States  since  January  i,  1S63;  first 
of  all  in  all  portions  of  the  country  engaged  in  rebellion. 

"  There  is  a  very  interesting  discussion  in  the  Journ.  des  Economistes  for 
June  1S63,  of  the  question  whether  the  owners  of  serfs  are  entitled  to  com- 
pensation on  their  emancipation,  by  Laboulaye,  WoloivsM^  Lavcrgne^  Garnier, 
Simon  and  others.  In  the  United  States  it  would  have  required  $2,000,000,000 
to  fully  compensate  the  slave-holders  for  depriving  them  of  their  slaves. 
(Quart.  R.,  Jan.,  1S74,  142.)  Compare  my  view,  RoscJicr,  Nationalokonomik 
des  Ackerbaues,  §  124. 

'  Leave  a  new-born  child  to  its  "  natural  freedom  "  for  t^venty-four  hours, 
and  it  will  in  all  probability  be  dead  at  the  end  of  the  time ! 

"^  Compare  Edinburgh  Review,  LXXXIII,  64  if.,  April,  1S51,  333.  Klein's 
Annalen  XXV,  70,  ft".  Even  in  the  fifth  book  of  Moses,  15,  13,  ff.,  we  see 
that  experience  had  taken  into  consideration  that  a  freed  serf  without  capital 
or  landed  property  might  very  readily  be  in  a  worse  condition  than  he  was 
before.  In  the  United  States,  the  anticipation  that  the  emancipated  negroes 
might  diminish  in  numbers  has  not  been  realized.  The  census  of  1870 
showed  a  negro  population  of  4,880,000,  nearly  ten  per  cent,  more  than  in 
1S60.  The  increase  of  the  number  of  churches,  schools  and  savings  banks 
also  bears  testimony  to  the  prosperity  of  the  negro.  (R.  Somers,  The  South- 
ern States  since  the  War,  1871.) 
Vol.  L— 15 


226  PRODUCTION  OF  GOODS.  [B.  I,  Ck.  IV. 

obedience  between  the  different  classes  of  the  people,  which, 
even  in  medieval  times,  never  obtained  in  all  its  purity,  is  cer- 
tainly unrecallable.  Hence  it  is,  that  all  hope  of  a  better  con- 
dition of  things  is  based  only  on  this,  that  the  lower  classes 
may  as  soon  as  possible  attain  to  true  independence.^ 


SECTION  LXXV. 

THE  SAME  SUBJECT  CONTINUED. 

Even  in  antiquity,  the  principal  nations  of  the  world  could 
not  keep  the  humanizing  influence  of  civilization  from  mak- 
ing itself  felt  on  their  slaves.  And  if  they  did  not  go  so  far 
as  to  bring  about  the  total  abolition  of  slavery,  it  is  unhesi- 
tatingly to  be  attributed  to  their  religious  inferiority.^  In 
Athens,  during  the  Peloponnesian  war,  it  was  almost  impossi- 
ble to  distinguish  the  slaves  from  the  poorer  freemen  by  their 
looks  or  dress.  Their  treatment  was  mild  in  proportion  as 
desertion  was  easier  by  reason  of  the  smallness  of  the  state  or 
the  frequency  of  war.  It  was  forbidden  to  beat  them;  and 
only  a  court  of  justice  could  punish  them  with  death.^  Eman- 
cipation, in  individual  cases,  was  very  frequent,  and  the  names 
of  Agoratos  and  of  the  law-reviser  Nicomachos  show  how 
great  a  part  an  emancipated  slave  might  play  in  the  nation.^ 

3  y.  S.  Mill,  Principles,  lo,  ch.  7. 

1  As  to  the  Jews,  see  Ezvald,  Geschichte  von  Israel,  I  2,  p.  198.  In  general, 
see  H.  Wallon,  Hist,  de  TEsclavage  dans  I'Antiquitd,  II,  1S47. 

2  Thucyd.  IV,  27;  XetwJ>h.  De  Re.  rep.  Art.  I,  10  if.,  Arisfoph.  Nubes,  6; 
Antipli.  De  Caede  Herod,  727.  In  the  "Frogs"  of  Aristophanes,  the  rela- 
tion between  the  slave  Xanthias  and  his  master  is  eloquent  testimony  to  the 
good  treatment  he  received.  Slaves  enjoyed  great  freedom  of  speech.  (De- 
viosth.  Phil.  Ill,  III.)  Concerning  masters  accused  of  cruelty,  see  Demosth. 
ISIid.  529,  7.  Athen.  VI,  266.  The  slave  who  had  been  ill-treated  might 
seek  refuge  in  a  temple,  after  which  his  master  was  compelled  to  sell  him. 
(ScJiol.  Arisioph.     Equitt.  1309.     Phdarcli,  Thes.  36.) 

'  Slaves  might  purchase  their  own  Ireedom  with  their  fectdiiun.  See  Petit. 
Legg.,  Art.  II,  179.  There  were  many  who  lived  entirely  on  their  own  ac- 
count, paying  a  certain  duty  or  tax  to  their  masters,  and  who  were  well  able 


Sec.  LXXV.]  EMANCIPATION.  227 

The  helot  system  of  the  Lacedemonians  preserved  much 
longer  a  great  deal  more  of  medieval  barbarism;  but  even 
here,  we  may  infer  from  the  frequent  uprisings  and  emanci- 
pations of  the  helots,  from  their  services  in  war  etc.,  that  their 
lot  was  made  less  hard  than  it  had  been.* 

Among  the  Romans,  with  whom  war  and  conquest  were 
so  long  considered  ^  the  principal  means  of  acquisition,  slav- 
ery was  relatively  very  hard.^  But,  later,  there  came  to  be 
several  different  grades  of  slavery  (scrvi  ordinarii  and  medias- 
tini  etc.) ;  and  in  slavery  every,  gradation  denotes  some  ameli- 
oration of  condition.'''  The  slave  obtained  the  right  to  pos- 
sess resources  of  his  own  (fccidium)?     In  addition  to  this, 

to  make  savings,  i?.  i?'. //crwz«««,  Privatalterthiimer,  §  13,  9,  58,  ii  ft".  See 
the  instance  in  Plato,  De  Rep.  VI,  495,  where  a  slave  who  had  grown  wealthy 
asks  the  daughter  of  his  former  master  in  marriage.  Moreover,  there  was  a 
general  indisposition  to  hold  Greeks  as  slaves.  (Pliilostr.  Apoll.  VIII,  7, 12.) 
The  case  cited  in  Demosth.  adv.  Nicostr.  1249  ft'.,  is  all  the  stronger  on  this 
account. 

4  Under  Cleomenes,  many  purchased  their  freedom  with  their  own  means. 
Plutarch,  Cleom.  23.  At  an  earlier  period,  men  like  Lysandros,  Gylippos, 
Kallikratidos  had  belonged  to  a  class  composed  of  the  children  of  slaves 
brought  up  as  citizens. 

5  Cicero,  pro  Mursena,  IX,  22. 

6  Think  of  the  subterranean  ergasiula,  the  fettered  door-keepers  and  the 
gladiatorial  exhibitions. 

''  Even  from  the  time  of  Plant  us,  the  servi  honcstiores  were  wont  to  keep  -7'- 
carios,  or  subordinate  slaves.  Plant.  Asin.  I,  4,  Seneca  De  Tranq.  Anim.  S. 
Compare  Cicero,  Farad.  V,  2.  Of  the  slaves  of  the  state,  the  public  scribes 
were  sometimes  found  in  excellent  circumstances. 

*The  peculium  was  fully  developed  in  the  time  of  Plautus  and  Terence. 
Compare  Terent.,  Phorm.  I,  i.  It  was  customary  to  promise  slaves  their 
freedom  as  soon  as  they  had  acquired  a  certain  peculium.  (Dionys.  Hal., 
Antt.  Rom.,  IV,  24.  Tac,  Ann.,  XIV,  42.)  Humane  masters  permitted 
their  slaves  to  dispose  freely  of  their  ;peculium  by  will.  (Plin.,  Ep.,  VIII,  16.) 
There  were  many  of  the  Romans  who  gave  their  slaves  a  fixed  salary,  from 
which  they  could  make  savings.  (Scnec,  Epist.,  80,  7.)  Shepherds  raised 
some  sheep  for  themselves  alone.  (Plaut.,  Asin.,  Ill,  i,  36;  Varro,  R.  R., 
I,  17,7.)  Premiums  were  offered  for  certain  products  (Athen.,Yl,2^i^d^, 
and  there  were  cases  even  in  which  businesses  were  farmed  out  to  slaves. 
(Corp.  Inscr.  Gr.,  No.  4,713  f)  The  servi  puhlici  had  the  right  to  dispose  of 
the  half  of  what  they  owned,  by  will.     (Ulp'au,  XX,  16.)     Contracts  of  loan 


228  PRODUCTION  OF  GOODS.  [B.  I,  Ch.  IV 

emancipation  became  much  more  frequent  in  the  later  repub- 
lic; so  much  so,  that  Augustus  considered  it  necessary  to  pass 
laws  taxing  frivolous  emancipation.  (L.  Aclia  Scntia  and 
Fiiria.)  ^  Where  men  like  Terence,  Roscius,  Tiro,  Phccdrus 
and  the  father  of  Horace  rose  from  the  condition  of  slav- 
ery, the  treatment  of  slaves  cannot  have  been  entirely  brutal- 
izing.^°  Under  the  emperors  who  oppressed  the  free  citizens, 
legislation  was  directed  more  than  ever  towards  the  protec- 
tion of  the  slaves.^^  Instead  of  permanent  slavery,  a  condition 
of  things  was  introduced  and  became  more  general  every  day, 
one  in  which  the  bondman  might  contract  a  legal  marriage, 
have  property  of  his  own,  and  in  which  he  was  protected 
against  an  arbitrary  increase  of  the  quota  he  had  to  pay  his 
master,  whether  in  money  or  produce,  although  he  still  re- 
mained bound  to  the  land.  This  class  was  formed  not  only  of 
the  oi'iginarii,  or  those  born  into  it,  but  also  of  a  large  number 
of  impoverished  freemen,  barbarian  prisoners  of  war  etc.^^^^ 


were  sometimes  made  between  master  and  slave.  (Plnt.^  Cato,  I,  21,  L.,  49, 
§  2,  Digest,  XV,  I.) 

^Compare  Tacit. ^  Ann.,  XIII,  26  seq.  During  the  time  from  356  to  211 
A.  C,  it  seems  tliat  there  were,  on  an  average,  1,380  slaves  emancipated 
yearly.     (Diireau  de  la  Malle,  Economie  polit.  des  Remains,  I,  290  fF.) 

■0  Concerning  the  highly  educated  slaves  of  Atticus,  of  the  like  of  whom 
the  Greeks  had  formerly  few  examples,  see  Drumann,  Geschichte  Roms., 
V,  66.  The  high  prices,  100,000,  and  even  200,000  sesterces,  paid  for  slaves, 
suppose  a  very  high  degree  of  education.  (Martial,  I,  59;  III,  62;  XI,  70; 
Seneca,  Ep.,  27.)  But  even  Cicero  Avas  ashamed  of  his  affliction  over  the 
death  of  an  exceptionally  clever  slave.     (Ad.  Att.,  I,  12.) 

'1  At  an  earlier  period,  even  the  censor  had  punished  cruel  masters.  But 
most  of  what  was  done  to  prevent  the  arbitrary  condemnation  to  death  of 
slaves,  their  castration  etc.,  and  to  give  them  rights  against  their  masters  for 
libidinous  acts  towards  them,  for  cruelty  and  insufficient  support,  or  the  fur- 
nishing them  with  bad  food,  was  done  after  the  time  of  Hadrian.  (Compare 
Scncca,de.  Benef,  III,  22;  de  Ira,  III,  40,  Siieton.,  Claud,  25,  Dom.,  7;  Sj>ar- 
tian.,  Hadr.,  iS;  Gaius,  I,  53;  L.,  i,  §  2,  Digest,  I,  6;  L.,  i,  §  8,  D.,  I,  12;  L., 
I,  §  2,  D.,  XLVII,  8;  L.,  i;  Cod.,  IX,  14;  Contra,  see  Dio  Cass,  I,  V,  17.) 
However,  the  vitce  necisque  fotestas  existed  in  the  time  of  Justinian.  (Zim- 
mem,  Geschichte  des  rom.,  Privati-echts,  I,  2,  661  ff.) 

^'^Salvian,  De  Gubern.  Dei,  V,  8.     Theod.,  Cad.  V,  4.    Eumenis^  Paneg. 


Sec.  LXXVI.]     THE  DOMESTIC  SERVANT  SYSTEM.  229 


SECTION    LXXVI. 

(APPENDIX  TO  CHAPTER  IV.) 

THE  DOMESTIC  SERVANT  SYSTEM. 

In  most  countries  the  servant  system  developed  itself  grad- 
ually out  of  serfdom,  or  of  some  condition  of  tutelage  analo- 
gous thereto.  This  is  seen  most  clearly  in  the  long  continuance 
of  forced  service,  by  which  the  subjects  of  the  lord  of  the  fee 
were  compelled  to  allow  their  children  to  remain  in  the  court 
of  the  lord  as  servants,  either  without  any  remuneration  what- 
ever, or  for  very  low  wages  fixed  by  long  continued  custom.^ 
Here,  also,  belongs  the  right  of  correction,  so  generally  ac- 
corded to  masters  in  former  times.  In  the  higher  stages  of 
civilization,  the  whole  relation  is  wont  to  be  resolved  more  and 
more  into  freedom  of  competition ;  and  this  process  is  wont  to 
take  place  earliest  and  most  strikingly  in  the  cities.  Where 
vast  numbers  of  men  are  brought  together,  demand  and  sup- 
Coast.  8,  9.  Trebell,  Poll.  Claud.,  9.  yustin.  Cad.,  XI,  26,  47.  Compare  v. 
Savigny,  Ueber  den  romischen  Colonat.     Berliner  Akad.,  1S22-23. 

"The  figures  given  in  ^l///c«.,  VI,  103,  concerning  the  number  of  bond- 
men in  Greece  are  almost  incredible.  For  Attica  alone,  the  estimates  vary 
between  110,000  (Lclronne,  in  the  Mem.  de  I'Academie  des  Inscr.,  1822,  192, 
ff.)  and  400,000  (Athen.  1.  c),  while  the  free  men  are  estimated  at  from  130,000 
to  150,000.  In  Rome,  during  the  time  from  the  e  pulsion  of  the  kings  until 
the  destruction  of  Carthage,  the  number  of  the  slaves  remained  about  the 
same.  (Blair,  State  of  Slavery  among  the  Romans,  1S33,  10,  15.)  On  the 
other  hand,  Durcaic  de  la  Malle  is  of  opinion,  that  in  576  B.  C,  the  number  of 
slaves  was  to  the  number  of  free  men  as  i  to  25,  and  in  225  B.  C.  (including 
the  metics),  as  22  to  27.  (Economic  polit.  des  Romains  I  270  ff.,  296.)  Com- 
pare Cato,  de  Re.  rust.  I,  3,  IV,  X,  i  XI;  i,  XVII,  XVIII,  i.  In  Germany, 
the  number  of  bondmen,  from  the  eighth  to  the  tenth  century,  was  estimated 
to  be  at  least  as  great  as  that  of  free  men.  (Grimm,  D.  Rechtsaltherthiimer, 
334.)  Among  the  Anglo  Saxons,  before  the  Norman  conquest,  it  Avas  much 
higher,  even  three-fourths  of  the  entire  population.  (Turner,  Hist,  of  the  A. 
S.,  VIII,  9.)  Compare  on  the  subject  of  this  whole  chapter  my  paper  in  the 
Archiv.  der  polit.  CEkonomie,  N.  F.,  IV,  30  ff. 

1  Klontrtipp,  Abhandlung  der  Lehre  vom  Zwangsdienste,  iSoi.  Frequently, 
the  lord  had  only  a  right  of  preference  in  case  the  children  of  the  tenant  de- 
sired to  abandon  the  parental  roof  and  take  service  elsewhere. 


230  PRODUCTION  OF  GOODS.  [B.  I,  Cii.  IV. 

ply  of  services  meet  most  easily.  The  nearer  in  the  course  of 
this  development  the  servant  system  approaches  to  piece-wages 
and  day-wages,  the  shorter  does  the  customary  (presumptive) 
duration  of  the  contract  last  /  the  more  voluntary  is  the  period 
of  leave-taking  by  both  parties ;  ^  the  more  does  the  entire  re- 
lation tend  to  be  limited  to  single  acts  of  service  agreed  upon 
in  advance  (§  39),  and  the  more  frequently  do  both  parties  en- 
deavor to  supply  the  place  of  the  domestic  servants  by  work- 
men who  receive  wages  and  live  outside  of  the  family.*  The 
extreme  of  this  direction  at  present  is  the  servant-institutes  in 
cities,  the  more  movable  and  more  democratic  character  of 
which  finds  expression  in  this,  that  they  have  extended  the 
use  of  personal  services  to  a  lower  circle  of  consumers  than 
could  previously  have  thought  of  employing  them.     In  Eng- 

-  In  Adam  SmiWs  time,  in  England,  the  presumption  was  that  a  servant 
had  been  hired  for  a  year.  (I,  2,  15  ed.,  Bas.)  Frederick  the  Great's  ordi- 
nance of  1769,  on  this  subject,  forbade  any  one  to  enter  into  service  for  a 
sliorter  time  than  this  (II,  §  i  ff.),  while  the  Saxon  ordinance  of  1835,  on  the 
same  matter,  allowed  engagements  by  the  month,  in  cities.  Darjes,  Erste 
Griinde  der  Cameralwissenschaften,  2d  ed.  (176S),  p.  432,  demands  that  ser- 
vants should  always  hire  themselves  for  at  least  four  or  five  years,  and  that 
their  masters  should  have,  during  the  whole  of  this  time,  the  right  to  enforce 
the  contract.  In  North  America,  however,  service  by  the  month  has  become 
customary  and  general,  and  no  notice  of  th-e  dissolution  of  the  contract  is,  as 
a  rule,  required.  (Deutsche  Vierteljahrsschrift,  1S53,  II,  191.)  In  Switzerland, 
contracts  for  service  by  the  week  are  frequently  made  even  by  country  serv- 
ants.    (Bokmeri,  Arbeiterverhh.,  II,  157.) 

3  In  the  south  of  England,  farm  hands  were  used  to  change  service  only  at 
Michaelmas.  The  choice  of  such  a  date  made  farmers  very  dependent  on 
them,  as  it  fell  in  harvest  time.  (Marshall^  Rural  Economy  of  the  Southern 
Countries,  II,  233.)  A  similar  complaint  in  Cleves.  (Schiverz,  Rheinisch- 
westphalische  Landw.,  21  if.)  In  jUlich,  a  half  year's  notice  was  required, 
during  which  time  the  servant  who  had  received  it,  performed  his  work  with 
disgust,  and  stirred  up  his  fellow  servants  against  their  master.     (Sclnverz, 

n,  87.) 

4  The  families  of  day  laborers,  to  whom  the  owner  of  the  land  gives  the 
use  of  a  house,  small  garden,  a  cow  etc.,  constitute  such  a  transition ;  and 
also,  workmen  Avho  are  fed.  In  Brandenburg,  in  1644,  only  married  persons 
or  widowers  with  children  were  permitted  to  work  as  day  laborers.  (My- 
UuSy  C.  C.  March.,  V,  1,  3,  11.) 


Sec.  LXXVI.]     the  DOMESTIC  SERVANT  SYSTEM.  231 

lish  agriculture  this  transition  was  completed  mainly  in  the 
third  decade  of  this  century.  The  change  was  unquestionably 
favorable  to  the  improvement  of  the  art  of  agriculture,  but  it 
was  frequently  damaging  to  the  social  relation  existing  be- 
tween the  rich  and  the  poor  in  the  country.^  In  Germany,  the 
sale  of  the  public  domains,  conscription  and  Landwehr  duty 
have  operated  in  this  direction.^  Hence  it  is,  for  instance,  that 
in  Prussia,  the  servants,  in  1816,  were  15.18  per  cent,  of  the 
entire  male  population  over  14  years  of  age,  and  17.84  per 
cent,  of  the  entire  female  population  over  14  years  of  age.  In 
1861,  on  the  other  hand,  there  were  only  11.88  and  12.93  per 
cent.,  respectively,  while  the  number  of  day  laborers  and  work- 
men, in  the  same  time,  increased  from  16.29  P^^  cent,  males, 
and  10.87  psr  cent,  females,  to  20.95  and  16.65  P^^  cent.,  re- 
spectively.''   In  most  civilized  countries,  the  grade  of  society 

5  Wakefield,  Swing  Unmasked,  or  the  Causes  of  rural  Incendiarism,  1S31. 

*  By  means  of  the  former,  the  number  of  independent  small  householders 
was  much  increased  in  the  country.  Masters  feel  indisposed  to  hire  young 
men  liable  to  be  subjected  to  military  duty,  because  they  may  be  called  away 
at  the  moment  their  services  are  most  needed.  The  returning  soldier,  as  a 
rul£,  feels  above  doing  menial  service.  (Schtverz,  passim,  I,  191  ff.,  236.) 
On  this  account,  servants'  wages  in  Cleves  rose  much  higher  than  those  of 
day  laborers.  (194-)  In  Belgium,  a  farm  hand  cost,  on  an  average,  400 
francs  a  year ;  a  day  laborer,  counting  300  working  days  to  the  year,  only 
339  francs.  (Horn,  Statist.  Gemalde,  175.)  In  the  Palatinate,  day  labor- 
ers who  receive  nothing  but  their  wages  cost  their  masters  less  than  those 
who  receive  only  their  food ;  and  servants  are  the  dearest  of  all.  (Hanssci/., 
Archiv  der  Politischen  OEkonomie,  N.  F.  X,  243.)  If  servants  were  rela- 
tively more  poorly  paid  in  1813  than  day  laborers  (Lofz,  Revision,  III,  147), 
it  was  because  of  the  at  least  temporary  retrogression  of  civilization  which 
every  great  war  causes. 

">  Engel^  Preuss.  Statist.  Jahrb.,  II,  261.  Services  which  contribute  to  per- 
sonal convenience  are  naturally  committed  much  less  frequently  to  inde- 
pendent day  laborers  than  those  which  aid  in  production  proper.  Hence  it 
is,  that,  as  civilization  advances,  house-servants,  especially  of  the  female  sex, 
constitute  an  ever-increasing  portion  of  the  total  number  of  servants.  In 
Prussia,  in  1816,  the  number  of  servants  who  ministered  to  personal  comfort 
was  only  4.19  per  cent,  of  the  total  number  of  servants  engaged  in  industry; 
of  female  servants,  it  was  13.4  per  cent.  In  1S61,  on  the  other  hand,  the 
percentages  were  8.4  and  37.2.    In  Great  Britain,  of  the  total  number  of 


232  PRODUCTION  OF  GOODS.  [B.  I,  Ch.  IV. 

from  which  servants  are  recruited  grows  lower  and  lower  as 
the  spirit  of  independence  extends  to  the  deeper  strata  of  hu- 
manity.^ 

The  servant  class  may  continue  a  long  time  yet  to  be  a 
school  of  development  for  those  of  the  lower  classes,  who,  ripe 
in  body,  are  not  intellectually  independent;  just  as  the  duty 
of  bearing  arms  has  been  a  school  of  improvement  for  all  male 
youth.  Life-long  servants  are  as  seldom  to  be  desired  as  life- 
long soldiers. 

In  most  places,  the  long  transition  period  from  complete 
bondage  to  free  competition  was  governed  by  a  police  system 
of  wardship,  which  was  very  unfavorable  to  the  servant  class. 
Such  especially  was  the  provision  that  all  young  people  of  the 
lower  classes,  who  could  not  expressly  show  that  they  were 
employed  under  the  paternal  roof  or  at  some  trade,  should  be 
compelled  to  seek  some  outside  or  inland  work;^  such  also 
was  the  strict  prohibition  of  "usurious"  wage-claims,  and 
the  "  decoying  "  of  servants  from  their  masters.^''    Besides,  a 

servants  over  20  years  of  age,  only  2  per  cent,  were  engaged  in  personal 
services.  In  1841,  they  were  3^  per  cent.  (Alcidmger.)  In  France,  in 
1S51,  2.5  per  cent,  of  the  whole  population  were  in  domestical.     (Stat,  off^) 

*  In  England,  now  more  especially,  out  of  farm-hand  day  laborers :  Edin- 
burgh Rev.,  April,  1S62. 

9  A  chief  element  in  the  earlier  "  organization  of  labor."  So,  also,  in  the 
Magdeburg      Gesindeordnung  (service-i-egulation)  of  1789. 

't*  Saxon  Landcsordnungoi  of  1482  and  1543.  Cod.  August.  I,  3,  23.  The 
Gcsindeordninig  (service  regulation)  of  Frederick  the  Great,  threatened 
with  the  house  of  correction  the  receivers,  and  under  certain  circumstances 
also  the  givers  of  wages  higher  than  the  fixed  rate  ofwagesjbutas  a  "matter 
of  course,"  the  payment  of  wages  less  than  this  was  permitted.  (V,  §  7.) 
Great  care  was  taken  that  wages  greater  than  the  law  allowed  should  not  be 
evaded  by  the  payment  of  arrha  or  payment  in  produce.  The  same  law 
forbade  the  deprivation  of  the  servant  of  his  right  to  determine  the  service 
by  making  of  loans  to  him  on  long  time  (II,  §  7.)  Even  v.  Berg.,  Handbuch 
des  deutschen  Polizeirechts,  calls  it  a  duty  of  the  public  authorities  charged 
with  the  protection  of  property  and  of  the  public  security,  to  see  to  it  that 
there  be  no  lack  of  good  servants,  and  that  the  public  (as  if  those  who  sell 
their  services  were  not  a  part  of  it)  should  not  be  made  the  victims  of  exor- 
bitant demands  in  the  matter  of  servants'  wages.     Jung.,  more  humane,  de- 


Sec.  LXXVI.]  THE  DOMESTIC  SERVANT  SYSTEM.  233 

great  many  provisions  relating  to  servants,  and  based  on  views 
belonging  to  an  older  economic  condition,  were  intended  to 
throw  obstacles  in  the  way  of  farm  hands  and  country  serv- 
ants ^^  becoming  servants  in  towns ;  and,  on  the  other  hand,  to 
facilitate  the  speedy  abandonment  of  service  in  all  cases  in 
which  the  servant  desired  to  marry.^^  All  these  preferences 
in  favor  of  one  class  of  contractors,  and  at  the  cost  of  another, 
are  radically  opposed  to  the  modern  political  spirit.  The  laws 
relating  to  servants  are  wont,  in  our  day,  to  have  but  one  ob- 
ject, the  prevention,  by  registration  with  the  police,  of  fraud 
and  breach  of  contract,  and  of  all  strife  and  litigation  by  the 
legally  formulating  of  the  conditions  which  are  very  frequently 
tacitly  understood. 

The  ideal  of  the  relation  of  master  and  servant  is  attained 
when  it  is  considered  by  both  as  a  part  of  the  life  of  a  Christian 
family.^^  Hence,  benevolence  on  the  one  side  and  devoted- 
ness  on  the  other,  fidelity  on  both  sides,  disinterested  care  for 
the  present  and  future  interests  each  of  the  other  tanqiiam 
sua\  and  especially  for  each  other's  eternal  future.  Whether 
this  state  of  mutual  feeling  is  best  furthered  by  the  patriarchal 
system,  by  a  police  system,  or  by  free  competition,  it  is  scarcely 
possible  to  say.  It  may,  however,  be  affirmed  that  it  depends 
upon  a  mutual  and  continued  denial  of  self  not  easy  to  attain. 

mands  that  the  authorities  shall  protect,  especially,  the  weaker  party.  (Grund- 
lehre  der  Staatswirthschaft,  1792,  700.)  In  Prussian  legislation,  the  Silesian 
rescript  of  March  13,  1S09,  is  the  beginning  of  the  new  order  of  things. 
(Rabe,  Samml.  preuss.  Gesetze,  X,  59  ft")  The  Obertribunal,  or  high  court, 
decided,  in  1S74,  ^^'^^^  the  bringing  back  of  absconding  servants  by  the  police, 
which  the  law  concerning  servants  of  18 10  provided  for,  should  not  be  al- 
lowed to  occur  any  more. 

"  Ordinance  of  the  elector  of  Saxony  of  1766,  prohibiting  the  inhabitants 
of  cities  to  take  an  apprentice  from  among  the  peasantry,  unless  he  had  served 
at  least  four  years  as  a  farm  hand,  beginning  with  his  fourteenth  yeai*.  Sim- 
ilarly, in  Prussia  in  17S1. 

12  In  Berlin,  even  before  the  "  populationistischen  "  period :  Fidkin,  Histor. 
diplom.  Beitrage  zur  Gesch.    der    Stadt   Berlin,  I,  loi.     (From    the   year 

I397-) 

13  1  Peter,  2,  iS  ft".;  I  Timoth.,  6,  12;  Ephes.,  6,  5;  Philem.,  15  ft". 


234  PRODUCTION  OF  GOODS.  [B.  I,  Ch.  IV. 

Where  it  really  prevails,  all  the  advantages  of  the  piece-work 
system  are  obtained  in  a  worthy  and  organic  manner,  and 
without  its  atomistic  drawbacks.^* 

'*  In  the  German  colonies  of  Mennonites  in  Russia,  every  youth  serves  a 
few  years  in  the  family  of  some  other  peasant.  This  is  considered  a  sort  of 
school.  Wages  are  of  course  very  large,  and  the  treatment  very  mild. 
v.Haxthauscn^  Studien,  II,  1S5.  Southwestern  Germany  where  small  landed 
proprietors  are  many,  something  very  analogous  to  this  continues,  (v.  d. 
GoUz,  loc.  cit.,  452.) 


Sec.  LXXVII.]  CAPITAL.  233 


CHAPTER  V. 

COMMUNITY    OF    GOODS    AND    PRIVATE 
PROPERTY. 

CAPITAL  —  PROPERTY. 


SECTION  LXXVII. 

CAPITAL.  — IMPORTANCE  OF  PRIVATE  PROPERTY. 

As  human  labor  can  attain  its  fiill  development,  only  on  the 
supposition  that  personal  freedom  is  allowed  to  develop  to  its 
full  economic  importance  and  dimensions,  so  capital  can  de- 
velop its  fuU  productive  power  only  on  the  supposition  of  the 
existence  of  the  freedom  of  personal  property.  Who  would 
save  anything,  that  is,  give  up  present  enjoyment,  if  he  were 
not  certain  of  future  enjoyment?^  The  legitimacy  of  private 
property  has,  since  the  time  of  Locke,"  been  based,  by  the 
greater  number  of  political  economists,  on  the  right  inherent 
in  every  workman,  either  to  consume  or  to  save  the  product 
of  his  labor.  But  it  should  not  be  forgotten  here  that,  at  least 
in  the  higher  stages  of  the  economy  of  a  nation,  scarcely  any 
work  or  saving  is  possible  without  the  cooperation  of  society. 
And  society  must  be  conceived  not  only  as  the  sum-total  of 
the  now  living  individuals  that  compose  it,  but  in  its  entire 

1  For  a  masterly  exposition  of  the  doctrine  that  the  right  of  prescription  or 
limitation  is  related  to  the  politico-economical  necessity  of  property,  see 
John  Stuart  Mill,  Principles,  3,  II,  ch.  2,  sec.  2. 

^  Locke,  On  Civil  Government,  II,  §  25-51 ;  and  so  L.  Mendelssohn^  Jerusa- 
lem (17S3),  32;  Thiers,  Du  Droit  de  la  Propriete  (1S49). 


23(5  PRODUCTION  OF  GOODS.  [B.  I,  Ch.  V. 

past,  present  and  future,  and  also  as  being  led  and  borne  on- 
ward by  eternal  ideas  and  wants.^ 

3  Modern  writers,  in  their  attempt  to  find  a  philosophical  basis  for  the  right 
of  propertj^,  have  taken  two  principal  directions,  the  first  a  juridical,  the  sec- 
ond a  political  one.  The  axiom,  res  nnllius  ccdit  primo  occupanti  (compare  L. 
3,  Digest,  XLI,  i),  explains  only  the  smallebt  part  of  the  relations  of  prop- 
erty, and  that  only  because  of  a  very  fortuitous  circumstance.  According  to 
Hobbes  (Leviathan,  24),  property  has  its  origin  in  the  recognition  of  it  by  the 
power  of  the  state,  by  the  autorite  pullique^  the  goiivcrnanent  (Bossuet,  Po- 
litique tiree  de  I'Ecriture,  Sainte,  L.  3,  4),  or  as  Montesquieu  (Esprit  des  Lois 
XX VL,  15)  more  mildly  expresses  it,  in  the  laws.  The  application  of  this 
principle  would,  on  account  of  the  extreme  changeableness  of  the  laws  of 
everj^  state,  lead  to  most  extreme  insecurity,  and  to  a  steady  oscillation  from 
one  Utopia  to  another,  from  one  revolution  to  another,  if  it  were  not,  at  the 
same  time,  recognized  that  each  one  had  a  just  title  to  the  acquisitions  he 
had  made,  not  because  the  law,  for  the  time  being  existing,  acknowledged 
the  right,  but  because  they  were  the  product  of  his  labor  and  saving.  The 
theory  which  bases  the  right  of  property  on  contract  cannot  be  objected  to 
with  as  much  reason.  Thus,  Hugo  Grotiiis,  Jus  Belli  et  Pacis,  II,  2,  who 
even  justifies  the  occupation  of  things  without  an  owner,  on  the  supposition 
of  the  existence  of  an  implied  contract.  It  is  very  characteristic  of  the  En- 
glish, that  in  their  political  language,  the  words  "  liberty  "  and  "  property  " 
are  so  frequently  found  in  each  other's  company.  In  one  of  his  classic 
speeches  made  by  Fox  in  17S4,  he  gives  a  definition  of  liberty  which  be- 
gins with  the  words,  "  It  consists  in  the  safe  and  sacred  possession  of  a  man's 
property  "  etc.  The  recent  doctrine,  not  unfrequently  to  be  met  with,  that 
every  man  has  a  right  to  an  amount  of  property  corresponding  to  his  wants, 
may  be  used  to  sanction  all  kinds  of  socialistic  inferences.  An  entirely  be- 
wildered and  bewildering  description  is  to  be  found  in  ProudhoiCs  Qu'est  ce 
que  la  Propriete,  1S48,  as  the  precursor  of  which  BrissoVs  Recherches  phil- 
osophiques  sur  le  Droit  de  Propridte  et  le  Vol,  may  be  considered.  In  me- 
dieval times,  there  are  always  a  multitude  of  other  titles  to  property  besides 
production  and  saving.  The  title  which  is  held  in  highest  esteem  for  the 
time  being  is  always  because  of  this  very  extreme  vis-a-vis  of  all  other 
titles,  strengthened  and  made  general. 


Sec.  LXXVIII.]       SOCIALISM  AND  COMMUNISM.  237 

SECTION  LXXVIII. 

SOCIALISM  AND  COMMUNISM. 

In  opposition  to  this,  the  idea  of  a  community  of  goods  has 
found  favor,  especially  in  times  when  the  four  following  con- 
ditions met:^ 

A.  A  xvcll-dcfincd  confrontation  of  rich  and  -poor.  So  long 
as  there  is  a  middle  class  of  considerable  numbers  between 
them,  the  two  extremes  are  kept,  by  its  moral  force,  from  com- 
ing into  collision.  There  is  no  greater  preservative  against 
env}?-  of  the  superior  classes  and  contempt  for  the  inferior,  than 
the  gradual  and  unbroken  fading  of  one  class  of  society  into 
another.  Sf crate  miser i^  cavcte  f dices!  In  such  a  state  of 
social  organization,  we  find  the  utmost  and  freshest  productive 
activity  at  every  round  of  the  great  ladder.  Those  at  the 
bottom  are  straining  every  nerve  to  rise,  and  those  higher  up, 

1  The  word  socialism  brought  into  use  by  L.  Rcyhaud  is  as  ambiguous  as 
the  Avord  communism  is  simple  and  intelligible.  But  most  socialists  agree 
that  actual  "  society  "  (which  is  indeed  to  be  distinguished  from  the  state)  is, 
together  with  its  foundations,  the  existing  relations  of  property  and  the 
family,  entirely  wrong.  A  radical  reconstruction,  they  say,  is  needed  to 
remove  forever  the  chief  evil  of  this  system,  viz. :  the  glaring  difference  be- 
tween the  rich  and  the  poor,  the  educated  and  the  uneducated.  The  differ- 
ence between  the  doctrines  of  the  socialists  and  of  Political  Economy  does 
not,  by  any  means,  consist  in  this,  that  the  former  concerns  itself  more  with 
the  welfare  of  the  lower  classes,  or  even  that  it  gives  wider  scope  to  econ- 
omy in  common.  But  socialism  is,  indeed,  a  living  or  housekeeping  in 
common  (Geineinivirthschaft)^  Avhich  goes  far  beyond  the  feeling  for  the  com- 
mon interest  (^Gtvwe/w.s/ww^.  Such  economy  in  common  is  always  opposed  to 
freedom,  and,  at  its  first  introduction,  contrary  to  law.  It  can  guaranty  no 
compensation  to  those  who  have  suffered  from  violence  or  force,  because  it 
leads  to  a  thoughtless  and  wasteful  exhaustion  of  the  nation's  resources,  in- 
asmuch as  it  weakens  the  incentive  to  industry  and  frugality.  Political  Econ- 
omy, on  the  other  hand,  recommends  an  expropriation  when  the  incentives 
to  industry  and  frugality  are  thereby  strengthened;  and  the  increased  re- 
sources thus  obtained  serve  it,  as  full  compensation  to  those  whose  property 
has  been  exj>roj>riated. 


238  PRODUCTION  OF  GOODS.  [B.  I,  Ch.  V. 

not  to  fall  below.  But  where  the  rich  and  the  poor  are  sepa- 
rated by  an  abyss  which  there  is  no  hope  of  ever  crossing, 
how  pride  on  the  one  side  and  envy  on  the  other  rage!  and 
especially  in  the  foci  of  industry,  the  great  cities,  where  the 
deepest  misery  is  found  side  by  side  with  the  most  brazen- 
faced luxur}^,  and  where  the  wretched  themselves  conscious  of 
their  numbers,  mutually  excite  their  own  bad  passions.  It 
cannot,  unfortunately,  be  denied,  that  when  a  nation  has  at- 
tained the  acme  of  its  development,  we  find  a  multitude  of 
tendencies  prevailing  to  make  the  rich  richer  and  the  poor,  at 
least  relatively  poorer,  and  thus  to  diminish  the  numbers  of 
the  middle  class  from  both  sides;  unless,  indeed,  remedial  in- 
fluences are  brought  to  bear  and  to  operate  in  a  contrary 
direction.^ 

B.  A  high  degree  of  the  division  of  labor ^  by  which,  on  the 
one  hand,  the  mutual  dependence  of  man  on  man  grows  ever 
greater,  but  by  which,  at  the  same  time,  the  eye  of  the  uncul- 
tured man  becomes  less  and  less  able  to  perceive  the  connec- 
tion existing  between  merit  and  reward,  or  service  and  re- 
muneration. Let  us  betake  ourselves  in  imagination  to  Cru- 
soe's island.  There,  when  one  man,  after  the  labor  of  many 
months,  has  hollowed  out  a  tree  into  a  canoe,  with  no  tools 
but  an  animal's  tooth,  it  does  not  occur  to  another  who,  in  the 
meantime  was,  it  may  be,  sleeping  on  his  bear-skin,  to  contest 
the  right  of  the  former  to  the  fruit  of  his  labor.  How  differ- 
ent this  from  the  condition  of  things  where  civilization  is  ad- 
vanced, as  it  is  in  our  day;  where  the  banker,  by  a  single 
stroke  of  his  pen,  seems  to  earn  a  thousand  times  more  than 
a  day-laborer  in  a  week ;  where,  in  the  case  of  those  who  loan 
money  on  interest,  their  debtors  too  frequently  forget  how 
laborious  was  the  process  of  acquiring  the  loaned  capital  by 
the  possessors,  or  their  predecessors  in  ownership.  More  es- 
pecially, we  have,  in  times  of  "  over-population,"  whole  masses 

■^  See  RoscJicr,  Betrachtungen  iiber  Socialismus  und  Communismus,  Ben 
liner  Zeitschrift  fiir  Gcschichtwissenschaft,  1S45,  III,  422  ff. 


Sec.  LXXVIII.]      SOCIALISM  AND  COMMUNISM.  039 

of  honest  men  asking  not  alms,  but  onl}^  work,  an  opportunity 
to  earn  their  bread,  and  yet  on  the  verge  of  starvation.^ 

C.  A  violent  shaJciiig-  or  -pcrflcxing  cf  ■public  opinion  in  its 
relation  to  the  feeling  of  Rights  by  rczvlidions^  especially  when 
they  follow  rapidly  one  on  the  heels  of  another,  and  take  oppo- 
site directions.  On  such  occasions,  both  parties  have  generall}'- 
prostituted  themselves  for  the  sake  of  the  favor  of  the  masses ; 
and  the  latter  have  become  conscious  of  the  changes  which  the 
force  of  their  arms  may  effect.  In  this  way,  it  is  impossible 
that  until  order  is  again  entirely  established,  the  reins  of  power 
should  not  be  slackened  in  many  ways  at  the  demands  of  the 
multitude.  In  this  way,  too,  they  are  stirred  up  to  the  making 
of  pretentious  claims  which  it  is  afterwards  very  difficult  to 
silence.  In  every  long  and  far-reaching  revolution,  whether 
undertaken  in  the  interest  of  the  crown,  the  nobility  or  the 
middle  classes,  we  find,  side  by  side  with  the  seed  it  intended 
to  sow,  the  tares  of  communism  sprout  up. 

D.  Pretensions  of  the  lozver  classes  in  consequence  of  a  demo- 
cratic constitution.  Communism  is  the  logically  not  inconsist- 
ent exaggeration  of  the  principle  of  equality.  Men  who  al- 
ways hear  themselves  designated  as  "  the  sovereign  people," 
and  their  welfare  as  the  supreme  law  of  the  state,  are  more 
apt  than  others  to  feel  more  keenly  the  distance  which  sepa- 
rates their  own  misery  from  the  superabundance  of  others. 
And,  indeed,  to  what  an  extent  our  ph3'sical  wants  are  deter- 
mined by  our  intellectual  mould !  The  Greenlander  feels  com- 
fortable in  his  mud  hut,  with  his  oil-jug.  An  Englishman  in 
the  same  condition  would  despair.^  ^ 

2  Vivre  en  travaillant  ou  moiirir  en  comhattant  —  the  device  on  the  flags  of 
the  mutinous  silk-weavers  at  Lyons,  in  1S32. 

4  We  are  so  assured  by  Vmihan  (Dime  Royale,  34  seq.),  of  the  later  years 
of  the  reign  of  Louis  XIV.,  that  nearly  -^^  of  the  French  people  begged, 
that  y^^  could  give  no  alms,  because  they  Avere  themselves  on  the  very  brink 
of  indigence;  -^^  were  fort  malaisis^  embarassds  de  defies  ct  de  frocks; 
scarcely  one  per  cent,  could  be  said  to  he  fort  d,  leiir  aise.  How  much  better 
off  is  the  present  Parisian  Avorkman !  And  yet,  at  that  time,  there  was  not 
the  least  spread  of  communistic  doctrines.     It  is  indeed  seldom  that  com 


240  PRODUCTION  OF  GOODS.  [B.  I,  Ch.  V. 


SECTION  LXXIX. 

SOCIALISM     AND    COMMUNISM. 

(CONTINUED.) 

What  has  just  been  said  will  serve  to  explain  why,  in  the 
following  four  periods  of  the  world's  history,  socialistic  and 
communistic  ideas  have  been  most  widespread:  among  the 
ancients  at  the  time  of  the  decline  of  Greece,^  and  in  that 
of  the  degeneration  of  the  Roman  Republic  f  among  the  mod- 

pletely  doAvn-trodden  men  react  against  their  wretchedness  with  great  en- 
ergy. 

5 "  If  my  caj>rtce  be  the  source  of  law,  then  my  enjoyment  may  be  the  source 
of  the  division  of  the  nation's  resources."     StaJil,  Rechtsphilosophie,  II,  2,  72. 

•  Tliat  the  socialism  of  Plaio,  De  Repub.,  V,  was  no  mere  fancy,  is  proved 
by  the  polemic  which  Aristophanes  directs  against  it  in  his  Ecclesiazuses. 
See  also  Aristot.,  Polit.,  II,  2,  Schn.  In  the  contemporary  practice  of  the 
Greeks,  with  the  increasing  democratization  of  the  state,  it  became  more  and 
more  usual  for  it  to  bear  the  expense  of  the  outlay  for  the  means  of  subsist- 
ence of  the  great  crowd.  (See  PlutarcJi,  Cimo,  10.)  Every  act  of  public  life 
was  paid  for.  Citizens  were  paid  for  attending  popular  meetings  three  oboli 
per  day,  while  the  pay  of  the  soldiers  was  six,  and  that  of  the  sailors  three. 
(Thucyd.,  Ill,  17;  VII,  27;  VIII,  45.)  The  pay  of  the  commonest  day  lab- 
orer was  from  three  to  four  oboli  per  day.  Aristophan.,  Eccl.,  310,  and  Pollux, 
VII,  29.  The  number  of  magistrates  was  very  large,  in  order  that  as  many 
as  possible  might  participate  in  this  species  of  remuneration.  Thus,  in 
Athens,  when  it  had  only  about  20,000  inhabitants,  there  were  6,000  judges. 
In  addition  to  all  this,  there  were  numberless  feasts,  plays,  banquets  etc.,  which 
were  offered  to  the  people  gratis.  The  wealthy  who  were  compelled  to  meet 
all  the  expense  thus  incurred,  lived  in  such  a  state  of  terror  of  the  populace, 
that  they  considered  their  own  impoverishment  as  a  species  of  deliverance. 
(Xenoph.,  Conviv.,  4,  and  Lysias^  pro  Bonis.)  Isocrates  called  it  much  more 
dangerous  to  be  rich  than  to  commit  a  crime,  since  in  the  latter  case  one 
might  obtain  a  pardon  or  a  mild  punishment.  (De  Permut.,  p.  160.)  (Ly- 
sias,  De  Invalido,  de  sacra  Olea,  seq.)  There  is  little  difference  between  this 
state  of  things  and  a  semi-community  of  goods.  Only  that,  indeed,  the  great 
mass  of  the  slaves  were  excluded  from  enjoying  them.  The  contrast  which 
somewhat  later  distinguished  the  Cynics  from  the  Cyreno-Epicureans  af- 
fords a  striking  analogy  to  that  which,  in  our  own  times,  exists  between  the 
pure  socialists  and  the  worshipers  of  mammon  after  the  fashion  of  Doctor 
Ure.     Concerning  the  Utopia  of  lamdulos,  see  Diodor.,  II,  55  ff. 

''■  Our  sources  of  inlbrmation  concerning  the  division  of  tlie  Roman  repub- 
lic into  a  moneyed  oligarchy,  and  the  proletariat  are  very  numerous.    Com 


Sec.  LXXX.]         SOCIALISM  AND  COMMUNISM.  0^1 

erns  in  the  age  of  the  Reformation,^  and  again,  in  our  own 
day.* 

SECTION  LXXX. 

SOCIALISM  AND  COMMUNISM. 

(CONTINUED.) 

We  thus  see,  that  the  attempts  made  by  socialism  and  com- 
munism are,  by  no  means,  phenomena  unheard  of  in  the  past, 

pare  vi/ra,  §  205.  The  speeches  of  the  Gracchi  (e.  g.  Pint.,  T.  Gracchus,  9), 
and  still  more  the  violent  discourses  of  Catiline's  conspiracy  (Sallusi,  Cat., 
-Oj  23,  37-39),  remind  us  very  forcibly  of  the  shibboleths  of  modern  social- 
ism. We  very  frequently  meet  with  the  expression  of  a  longing  desire  to 
return  to  the  most  uncivilized  and  hoary  past,  when  there  was  no  money  and 
no  wealth  —  an  aspiration  which  lies  at  the  very  foundation  of  communisjii. 
Thus  Virgil,  Geo.,  I,  125,  ff.,  Tibiill.  I,  3,  35,  ff.  Propert.  II,  13,  III,  5,  11; 
Seneca,  Epist.,  90;  Soicc.,  Oct.  II,  Hippol.,  II,  ■2\Plin.,  H.  N.  XXXII,  3.  On 
the  other  hand,  the  practice  of  supporting  the  populace  at  the  expense  of 
great  candidates  or  of  the  state,  was  developed  to  a  very  great  extent.  The 
masses  lived  very  largely  by  the  sale  of  their  right  of  suffrage  to  the  highest 
bidder.  At  the  election  of  consuls  in  the  year  54,  500,000  thalers  were  oftered 
to  the  century  called  on  to  vote  first.     (Cicero,  ad  Quintum  II,  15;  ad.  A.  H. 

IV,  15.)  Even  Cato  had  a  part  in  such  bribery.  (Siieton.,  Caes.,  19.)  In  the 
social  reform  of  the  younger  Gracchus,  besides  the  limitation  of  large  land- 
ownership,  the  principal  points  were  the  following:  the  sale  of  wheat  under 
the  market  price,  but  only  to  the  inhabitants  of  Rome  itself;  the  construc- 
tion of  great  highways  in  Italy ;  colonization  at  the  expense  of  the  state,  and 
the  increase  of  soldiers'  pay.  (Ritsch,  Gracchen,  392  if.)  The  socialistic  plans 
of  RuUus  went  much  further.  Were  his  agi-arian  laws  put  in  execution,  he 
Avould  have  confiscated  very  nearly  the  entire  country  in  the  interest  of  the 
poor,  and  of  their  demagogues !  (Cicero,  De  Lege  agrar.)  Rome  twicx;  ex- 
perienced a  social  revolution  of  the  most  frightful  character,  one  by  which  a 
great  portion  of  all  private  goods  fell  into  the  hands  of  the  propertyless  (sol- 
diers), who  knew  nothing  of  how  to  turn  it  to  account  or  to  invest  it — under 
Sulla,  and  then  under  the  later  Triumviri.     (Compare  Appian,  Bell,  civil., 

V,  5,  22.)  Complaints  concerning  the  latter,  in  Horat.,  Epist.,  I,  3,  49;  Virgil, 
Buc,  IX,  28;  Tibiill.  I,  I,  19,  IV,  1,  1S2;  Propert.,  IV,  i,  129.  The  elder 
Gracchus  had  promised  compensation  to  the  last  possessors.  Tabula:  novce 
of  Cinna,  Catiline,  Ca;lius,  Dolebella.  Clodius  introduced  the  distribution 
of  wheat,  which  according  to  Cicero  pro  Sext.,  25,  ate  up  almost  one-fifth  ot 
the  public  revenues.  About  320,000  persons  were,  in  this  way,  supported  for 
a  long  period  of  time  (Sueton.,  Caes,  41,  Dio  C,  XLIII,  21;  L.  LV,  10),  but 
only  in  such  a  manner  as  to  keep  them  from  starvation.     (Sallttst,  26S  ed. 

Vol.  L— 16 


212  PRODUCTION  OF  GOODS.  [B.  I,  Cn.  V. 

and  peculiar  to  modern  times,  as  the  blind  adherents  and  op- 
ponents of  them  would  have  us  believe.   They  are  rather  dis- 

Bip.)  To  all  this  was  soon  added  distributions  of  salt,  meal  and  oil,  also  free 
baths,  numberless  public  plays,  colossal  banqueting,  payment  of  one  year's 
rent  etc.  Panem  ei  circenses!  (Juvenal,  X,  So  seq.)  The  mere  distribution 
of  money  under  Augustus,  in  Avhich  from  200,000  to  320,000  men  participa- 
ted, cost  each  time  from  2,500,000  to  6,000,000  thalers.  (Monum  Ancyr.,  373 
Wolf.)  Exti-aordinary  assistance  was,  by  way  of  preference,  accorded  to  col- 
onies of  the  poor.  (Sueton.^  Caes,  42.)  Concerning  this  entire  policy,  see 
Plin.,  Paneg.,  26  fF.  Even  in  Constantinople,  at  the  time  of  its  foundation, 
large  distributions  of  bread  were  made  at  the  expense  of  Egypt,  although 
there  could  scarcely  be  any  real  pauperism  in  that  new  and  flourishing  city. 
(Theod.,  Cod.,  XIII,  4,  XIV  16;  Socrat.^  II,  13.  I  can  only  allude  to  the  plan 
proposed  by  the  emperor  Gallien  by  the  neo-platonist  Plotin,  to  found  a  city 
in  which  the  ideas  of  Plato's  republic  should  be  carried  out.  (Porphyr.,  V, 
Plotin.,  8.) 

3  During  the  two  centuries  of  which  the  Reformation  constituted  the  mid- 
dle point,  the  transition  from  the  peasant  system  of  agriculture  to  the  large 
farming  system  of  modern  times  bore  very  heavily  on  the  inferior  classes. 
Such,  too,  was  the  operation  of  the  fall  in  price  of  the  precious  metals. 
(§  140.)  The  suppression  of  the  many  monasteries  caused  an  increase  in  the 
wretchedness  of  the  poor;  and  the  numerous  poor-laws  enacted  in  England, 
Spain  etc.,  were  not  sufficient  to  supply  a  remedy.  The  feeling  of  the  peo- 
ple during  this  period  of  tribulation  found  expression  in  the  War  of  the 
Peasants,  in  the  sect  of  Anabaptists,  in  the  many  reformations  and  counter- 
reformations,  in  the  revolt  of  the  Netherlands,  in  the  conflicts  for  the  crown 
in  France  and  England  etc.  In  Italy,  the  conti-ast  ex-isting  between  the 
moneyed  oligarchy  and  the  proletariat  had  been  developed  several  centuries, 
but  from  the  middle  of  the  sixteenth  century,  it  had  become  much  more  op- 
pressive by  reason  of  the  universal  impoverishment  of  the  country.  For  an 
account  of  the  pantheistic  "  Brethren  and  Sisters  of  the  Free  Spirit,"  with 
their  community  of  goods  and  of  women,  see  Ullmaim,  Reformatoren  vor 
der  Reformation,  II,  iS  fF.  They  were  very  numerous  from  the  thirteenth 
to  the  fifteenth  century  in  Italy  and  France,  as  well  as  in  Germany,  and  lead 
us  to  the  Adamites  in  the  Hussite  war.  (Aschbach^  Geschichte  K.  Sigis- 
munds.  III,  109.)  Earlier  yet,  we  have  the  sect  of  the  Giovannali,  who  had 
their  property  and  women  in  common,  and  who,  in  1355,  had  won  the  third 
of  Corsica,  but  who  were  afterwards  suppressed  by  Genoa  and  the  Church. 
(Lebret^  Geschichte  von  Italien,  VI,  20S  flf.)  The  coarse  socialist,  John 
Balle,  bears  about  the  same  relation  to  Wyclifle,  that  Miinzer  and  Bockholt 
did  to  Luther.  (Walshigham^  Hist.  Anglia;  in  Camden^  Scriptt.-,  2.^ <,)  Hans 
Boheim  of  Wiirzburg,  1476,  seems  to  be  the  direct  precursor  of  Miinzer, 
(Ullmann,  I,  421  ff.)     It  was  almost  as  usual  in  Luther's  time,  as  in  1S4S,  or 


Sec.  LXXX.]        SOCIALISM  AMD  COMMUNISM.  £43 

eases  of  the  body  social,  which  have  affected  every  highly 
civilized  nation  at  certain  periods  of   its  existence.     If   the 

in  our  day,  to  hear  of  the  deep  demoralization  of  trade  —  the  Fuggerei  of 
the  Germany  of  the  time  —  and  of  the  universal  system  of  fraud  that  pre- 
vailed. See  the  citations  in  Hagen,  Deutschland's  Verhiiltnisse  im  Reform- 
Zeitalter,  II,  313  ft".  Miinzer's  fundamental  principle:  Omnia  simul  commu- 
nia!  Sebastian  Frank,  Chronica,  Zeytbuch  und  Geschychtbibel  etc.,  1551,  fol. 
VI,  16,  27,  116, 194,  414,  433.  John  Bockholt's  life  presents  us  with  a  striking 
contrast.  While  they  were  bringing  his  perfumed  -women,  sparkling  with  jew- 
els, to  his  rose-covered  bed,  hung  with  curtains  of  gold  cloth,  on  which  he  was 
reclining,  his  subjects  were  a  prey  to  the  horrors  of  famine,  to  such  an  ex- 
tent that  they  were  compelled  to  salt  the  bodies  of  children  who  had  died 
of  starvation.  How  frightful  the  end  of  this  cominunistic  benefactor  of  man- 
kind! Libertine  community  of  goods  and  women.  (Calvin,  Instructio  adv. 
Libertinos,  cap.  21.)  English  communists  in  the  age  of  the  reformation. 
(J.  Story,  Comment,  on  the  Constitution  of  the  U.  S.,  I,  36.)  Even  under 
Cromwell,  there  were  many  Englishmen  who  believed  that  farmers  were  no 
longer  obliged  to  pay  rent  to  land-owners.  On  the  sect  of  Levellers,  see 
Walker,  History  of  the  Independency,  II,  152.  Even  in  Erasmus,  \;e  find 
some  sympathy  with  communism.  (Enchirid.  milit.  Christ,  80.)  Contra,  see 
Mclanchthon,  Prolegg.  in  Cic.  de  Off.,  Corp.  Reform,  XVI,  549  ft".  The  most 
remarkable  systematic  works  of  this  period  are  Thomas  Mare's,  Utopia,  1516, 
and  Campanelld! s  Civitas,  solis,  1620.  Thomas  More  bluntly  says  that  all  ex- 
isting governinents  are  in  fact  only  permanent  conspiracies  of  the  rich  to 
further  their  OAvn  interests  under  the  mask  of  the  common  good,  and  to  de- 
spoil labor.  The  abolition  of  money,  which  should  be  continued  in  use  only 
to  carry  on  foreign  war,  Avould,  he  contends,  remove  all  misery.  There  was 
no  really  private  property  in  his  Utopia.  There  should  be  a  rigid  superin- 
tendence of  all  work  by  the  public  authorities,  whose  duty  it  should  be  to  see 
to  it,  that  no  one  should  abandon  agricultural  pursuits.  All  should  eat  at  a 
common  table  and  dress  after  the  same  fashion.  Internal  commerce  should 
give  way  to  a  mutual  exchange  of  gifts  under  the  supervision  of  the  state. 
Camfanella,  besides  a  community  of  goods,  recommends  continually  varying 
occupation,  to  last  not  more  than  four  hours  daily ;  education  in  common, 
especially  by  means  of  pictures,  popular  encyclopedias  etc.,  all  under  the  su- 
preme guidance  of  a  despotism  to  be  composed  of  the  wise,  some  secular 
and  some  spiritual,  operating  through  the  confessional.  Socialists  nearly 
always  succeed  better  in  the  critical  part  of  their  works  than  in  the  positive. 
Compare  R.  Mohl,  Geschichte  und  Literatur  der  Staatswissenschaften,  §  i, 
165  ft". 

^  Considering  the  aversion  exhibited  against  private  property  by  J.  J. 
Rousseau,  and  the  unlimited  power  which  he  accords  to  the  majority  for 
the    time   being   in   the  state   (Contrat   Social,  1761,    IT,  ch.  4),  it   cannot 


24:4:  PRODUCTION  OF  GOODS.  [B.  I,  Cii.  V. 

body  be  too  weak  to  react  healthily  and  curatively  (§  84),  the 
evil  is  very  apt  to  lead  to  the  decline  of  all  true  freedom  and 

be  denied  that  his  freedom  and  equah'ty  contain,  to  say  the  least,  germs  of 
communism  by  no  means  insignificant.  But,  he  would,  in  the  present  state 
of  civil  society,  have  a  feeling  of  respect  for  the  rights  of  property  implanted 
in  the  mind. of  the  child  very  early,  and  even  before  the  feeling  of  liberty  is 
developed.  (Emilef  1762,  Livre  II.)  About  the  same  time  Morelly  published 
his  Basiliade  ou  Naufrage  des  lies  flottantes,  1753,  a  political  romance  in  the 
interest  of  communism.  See  the  same  author's  Code  de  la  Nature,  1755. 
JMably,  in  his  two  works,  Doutes  proposes  aux  Economistes,  1768,  and  La 
Legislation  ou  Principesdes  Lois,  1776,  recommended  the  abolition  of  all  ine- 
quality and  a  real  community  of  goods.  The  introduction  of  property  seems 
to  him,  unefaute  qii'il  dtait  j>resque  impossible  de  faire.  Even  Bcccaria  calls 
property  a  dreadful  but  perhaps  a  necessary  right  which  has  left  to  the  un- 
fortunate nothing  but  a  naked  existence.  (Dei  Delitti  e  delle  Pene,  1765,  cap 
22.)  The  French  Reign  of  Terror  came  pretty  near  carrying  these  ideas  into 
effect.  We  need  only  refer  to  the  abolition  of  the  census,  the  payments  made 
to  the  workingmen  who  attended  the  section  meetings,  two  francs  per  diem, 
the  enormous  extension  of  confiscation,  requisitions  and  forced  loans,  the 
revolution  effected  in  the  fortunes  of  individuals  by  the  system  of  issuing  as- 
signats,  the  maximum  affixed  to  the  price  of  all  the  necessaries  of  life,  the 
abolition  of  indirect  taxes,  and  of  what  remained  of  the  economic  institutions 
handed  down  from  the  middle  ages.  According  to  St.  yust:  V opulence  est 
une  infamie;  il  ne  faut  ni  riches  ni  fauvres.  The  Cahier  des  Pauvres  de- 
mands, first  of  all,  that  salaries  "  should  no  longer  be  estimated  in  accord- 
ance with  the  mui-derous  principles  of  unbridled  luxury."  See  Forster's  letter 
dated  November  15,  1793.  (Sammtl.  Schriften,  IX,  125.)  On  the  conspiracy 
of  Baboeuf,  who  was  executed  in  1796,  and  who  wanted  to  see  the  completest 
equality  and  community  of  labor,  of  enjoyment  and  education,  the  abolition 
of  large  cities  etc.,  see  Buotiarott{,'L,2t.  Conjuration  de.B.,  182 1.  This  book 
contributed  powerfully  towards  the  revival  of  communistic  ideas  after  the 
July  revolution.  Among  modern  communists  who  are  to  be  distinguished 
from  the  more  ancient,  especially  by  the  industrial  coloring  given  to  their 
theories,  Cabet,  Voyage  en  Icarie,  1840,  II,  holds  a  very  prominent  place. 
He  declares  the  abolition  of  religion,  of  the  family  and  of  the  state,  to 
be  open  questions,  and  desires  to  bring  the  practice  of  a  community  of 
goods  to  a  successful  issue  only  through  the  peaceful  channel  of  convic- 
tion. 

Compare  Reybaud,  Etudes  sur  les  Rdformateurs  contemporains  ou  Socialistes 
modernes,  1840.  L.  Stein,  Der  Socialismus  und  Communismus  des  heuti- 
gen  Frankreich.  See,  also,  the  learned  history  of  socialistic  systems  in 
Mario'' s  WeltOkonomie,  I,  2,  435  ff. ;  and  in  what  concerns  the  most  recent 
time,  R.  Meyer,  Der  Emancipationskampf  des  vierten  Standes,  II,  1S74,  seq. : 


Sec.  LXXX.]  SOCIALISM  AND  COMMUNISM.  245 

order.  The  communist,  viewing  all  other  things,  especially 
the  organization  of  the  state,  only  as  instruments  to  supply 
his  material  and  absolute  wants,  considers  the  liberal  either  as 
a  fool  who  is  ever  pursuing  the  phantoms  of  the  brain,  or  as  a 
knave  who  covers  his  own  selfishness  under  the  mask  of  the 
public  welfare.^  Hence  the  adherents  of  communism  are  sat- 
tisfied  with  any  form  of  government  which  seems  to  ofTer 
them  most,  and  this  a  ruthless  despotism  can  do,  at  least,  for  the 
moment.  And,  although  they  are  ever  ready  for  any  revolu- 
tion in  the  form  of  government,  and  easily  to  be  won  "over  to 
it,  they  are  most  readily  captivated  by  a  despotic  revolution. 
On  the  other  hand,  when  communism  seriously  threatens  all 
that  constitutes  the  wealth  of  a  people,  the  owners  of  that 
wealth  are  compelled  to  fly  to  any  refuge  which  holds  out  the 
promise  to  protect  them  from  it,  although  by  seeking  that 
same  refuge  they  may  destroy  their  own  political  fi-eedom." 
The  Achean  league,  which  under  the  leadership  of  Aratos,  the 
"enemy  of  tyrants,"  had  come  into  existence,  promising  so 
much  hope,  beheld  itself  later,  and  mainly  through  fear  of  the 
contagious  effects  of  Spartan  socialism  under  Cleomenes,  com- 

a  book  which,  in  £pite  of  its  many  defects,  both  doctrinal  and  journalistic,  is 
as  rich  in  thought,  and  in  the  knowledge  of  the  subject  it  treats  of,  as  it  is 
permeated  by  a  love  of  truth  regardless  of  consequences.  Among  the  op- 
ponents of  socialism  and  communism,  Malthus,  On  Population,  B.  Ill,  ch.  3, 
and  B.  Hildebrand,  Die  Nationalokonomie  der  Gegenwart  und  Zukunft,  vol.  I, 
1S48,  hold  a  very  distinguished  place,  y.  S.  Mill,  Principles,  II,  ch.  i,  3, 
calls  attention  to  the  fact  that  hitherto  the  principle  of  free  property  has 
never  been  consistently  carried  out.  The  first  social  arrangement  of  modern 
society  was  almost  everywhere  the  result  of  conquest  and  violence,  large 
ti-aces  of  which  yet  remain.  Things  have  always  been  made  property  which 
ought  not  to  be  property.  Governments  have  endeavored  to  intensify  the 
darkness  of  the  dark  side  of  property,  and  favored  the  concentration  instead 
of  the  diffusion  of  wealth  etc.  Hence,  no  one  can  claim  that  the  social 
wrongs,  so-called,  had  their  origin  in  property  as  such.  ScJidffle^  Kapitalis- 
mus  und  Socialismus,  1S70,  has  made  a  very  note- worthy  effort  to  recognize 
whatever  of  truth  there  is  in  socialism,  and  to  combat  its  errors. 

'  Saint  Simoii's  reproach  to  the  liberals,  that  their  fundamental  principle 
was :  6ie-toi  de  Id,  que  je  tn^y  mette,  is  well  known. 

'  Compare  Malthus,  Additions  to  the  Essay  on  Population,  1S17,  IV,  ch.  7 


246  PRODUCTION  OF  GOODS.  [B.  I,  Ck.  V. 

pelled  to  unite  with  the  Macedonians,  that  is,  to  give  them- 
selves up  entirely.     (§  204). 


SECTION  LXXXI. 

COMMUNITY  OF  GOODS. 

We  now,  for  the  present,  turn  our  gaze  from  the  frightful 
revolution,  destructive  of  all  civilization,  which  would  neces- 
sarily precede  the  establishment  of  a  community  of  goods,^ 
and  inquire  what  would  be  the  consequences.  Among  angels 
("  gods  and  sons  of  gods  "  of  Plato)  and  mere  animals,  a  com- 
munity of  goods  might,  perhaps,  exist  without  producing  in- 
jury. And  so,  too,  it  might  exist  among  men  bound  one  to 
the  other  by  the  bonds  of  the  truest  love.  The  life  of  every 
model  family  is  accompanied  by  a  species  of  community  of 
goods.^  But  in  more  extensive  social  organizations,  this  love 
is  never  found  except  as  an  element  of  the  most  exalted  relig- 
ious enthusiasm,  which,  as  a  rule,  is  of  very  short  duration; 
of  which  the  Acts  of  the  Apostles  (II,  44  ff,  32  ff,  V,  I,  II) 
aflbrds  us  the  best  known  and  most  beautiful  example." 

^  The  travatlleurs  igalitaires  wished  to  murder  not  only  the  king,  the  court, 
and  the  ministry,  but  also  the  Liberals  and  all  owners  of  property. 

^  As  soon,  indeed,  as  this  true  love  disappears  in  the  married  state,  the  com- 
munity of  goods  even  there  degenerates  only  too  easily  into  a  spoliation  of 
the  better  party  by  the  worse. 

3  The  community  of  goods  of  the  first  Christians  at  Jerusalem,  so  frequently 
cited  and  extolled  (  James^  I,  i),  was  only  a  community  of  use,  not  of  owner- 
ship (Acts  IV,  32),  and,  throughout,  a  voluntary  act  of  love,  not  a  duty  (V.  4), 
least  of  all,  a  right  which  the  poorer  might  assert.  Spite  of  all  this,  that  com- 
munity of  goods  produced  a  chronic  state  of  poverty  in  the  church  of  Jeru- 
salem. Hence,  Paul  had  collections  taken  up  for  them  on  all  sides,  without, 
however,  anywhere  establishing  a  similar  institution.  (Romans,  15,  26;  I. 
Corinth.,  16,  i.)  Compare  Alosheim,  De  vera  Natura  Communionis  Bonorum  in 
Ecclesia  Hierosol.,  in  his  Dissertatt.  ad  Histor.  Eccles.  pertinentes,  II,  i  ft".  As 
to  -whQihQr  Ba7'nabas  (Epist.,  19)  desired  to  say  anything  more,  compare  Epist. 
ad  Diognetum,  5.  For  a  real  recommendation  of  a  commuuity  of  goods,  on 
economic  grounds,  see  yoh.  Clirysosfom.,  in  Acta  Apost.,  Hom.  XI.  Also  Cle- 
mens Rom.  c.  2  C.  12,  qu.  I.     Community  of  goods  among  the  Essenes:  Pkilo. 


Sec.  LXXXI.]  COMMUNITY  OF  GOODS.  247 

Where  this  love  does  not  exist,  each  participant  in  the  com- 
munity of  goods  will,  as  a  rule,  seek  to  do  the  least  and  enjoy 
the  most  possible.*     In  a  society  of   one  hundred  thousand 

Opp.  II.  457  ff.  Joseph.  Bell,  Jud.,  II.  8.  Bcllcrmamiy  Geschichtliche  Nach- 
richten  iiber  die  Essener.  (1S21.)  In  many  monasteries,  there  has  been  and 
is  a  species  of  community  of  goods.  There  ^v■as  once  a  singular  contest  on 
this  subject,  carried  on  between  the  Minorites  and  tlie  Pope,  in  tlie  time  of 
Louis  of  Bavaria.  The  Minorities  claimed  that  property  was  a  thing,  so 
much  to  be  condemned,  that  even  food,  at  the  moment  of  eating  it,  did  not 
belong  to  the  person  using  it.  The  Pope  taught  on  the  other  hand,  that  even 
Christ  and  the  Apostles  possessed  property,  part  personal  and  part  in  com- 
mon. (Raynaldi,  Ann.  eccL,  XV,  241,  2S5  ff.)  Community  of  goods  of  the 
Homiliates,  later  of  the  Brothers  of  Common  Life,  after  the  manner  of  the 
monks,  but  of  a  much  higher  kind.  ( Ullinaiin,  Reformatoren  v.  d.  Reform, 
II,  62  ft")  The  first  settlers  of  New  Haven,  Connecticut,  held  their  proj^erty 
in  common.  Land  was  divided  among  families  in  proportion  to  the  number 
of  persons  in  them,  and  of  the  number  of  cattle  they  had  brought  with  them; 
and  all  sales  and  purchases  were  made  on  account  of  the  whole  community. 
And  so  in  Massachusetts  during  the  first  seven  years  of  the  colony's  exist- 
ence. (Ebeliuff,  Geschichte  und  Erdbeschreib.  der  Vereinigten  Staaten,  II, 
391, 1,  557.)  Hcrrnhut  community  of  goods  in  Pennsylvania,  from  1742  to 
1762,  but  which  was  done  away  with  when  the  number  of  colonists  became 
too  great.  (Rbeling,  IV,  717.)  Community  of  goods  of  the  Shakers  and  Lu- 
theran Rappers.  (Bucl-tnff/iain,^di?,\.QYn.  States,  11,214,  4'7-  Prinz  Netnvied, 
Reise  in  Nord  Amerika,  I,  136,  ft'.)  Russian  sects  with  community  of  goods. 
(v.  Haxthatisen,  I,  366, 407.)  Harlcss,  christliche  Ethik  §  50',  distinguishes  very 
well  between  the  "anti-christian"  and  "pseudo  christian"  stand  point,  from 
which  it  is  sought  to  establish  the  doctrine  of  a  community  of  goods.  The 
Christian  view  of  this  subject  (compare  Ephes.,  4,  28,  I;  Thess.,  4,  ii,II,  3,  12; 
Matth.,  6, 24 ;  Pet.  4, 10 ;  Matth.,  26,  7-1 1)  is  accused  of  hypocrisy  by  many  so- 
cialists. It  is  very  easy,  they  say,  when  one  is  himself  in  comfortable  cir- 
cumstances, to  represent  to  the  poor  that  their  poverty  is  a  school  for  heaven, 
and  to  preach  a  contempt  for  riches  etc.  They  entirely  forget,  that  the  first 
promulgation  of  the  Gospel  was  made  at  a  time  when  the  worst  kind  of  pau- 
perism prevailed ;  and  that  even  the  Master  Himself,  and  the  greater  number 
of  His  Apostles  belonged  to  theloAvest  stratum  of  society.  Luke,%  58.  Many 
of  the  Fathers  of  the  Church,  however,  in  their  exhortations  to  benevolence, 
used  language  in  which  modern  Socialists  have  found  a  rich  mine  which 
they  have  sedulously  worked.  ('Compare  Villegardcllc,  Ilistoire  des  Idees  so- 
ciales,  IS46,  61  ft".) 

^  Even  Aristotle  says  that  what  is  common  to  many  is  a  matter  of  little 
concern  to  any  one.  (Polit.,  II,  i.)  Bastiat  remarks:  "We  compete  to-day 
to  see  who  works  most  and  best.     Under  another  regime,  we  should  emulate 


248  PRODUCTION  OF  GOODS.  [B.  I,  Ch.  V. 

members,  each  individual  would  be  interested  in  the  results  of 
its  aggregate  frugality  only  indirectly,  and  only  to  the  extent 
of  a  one-hundred  thousandth  part  of  the  whole ;  that  is,  practi- 
cally, not  at  all.^  Individual  selfishness  would  expend  itself 
entirely  on  the  division  of  what  the  whole  community  pro- 
duced. It  would,  consequently,  and  almost  always  be  detri- 
mental to  the  whole,  and  to  the  other  individuals  of  the 
society;  whereas,  at  present,  it  does  so  only  in  exceptional 
cases.  When  Louis  Blanc,  as  Mably  had  before  him,  recom- 
mended that  the  -point  cV  homicur  should  take  the  place  of  the 
interet  -personnel,  as  a  spur  to  production,  and  a  check  on  con- 
sumption, and  cited  the  army  as  an  illustration  of  its  workings, 
he  forgot,  among  other  things,  the  thirty  cases  in  which  the 

one  another  to  see  who  should  work  least  and  worst."  (Harmonies  Econ., 
ch.  VIII.)  When  the  first  settlers  of  Virginia,  in  1611,  gave  up  the  system 
of  common  labor  and  of  joint-stock  companies,  as  much  work  was  performed 
in  a  day  as  formerly  in  a  week,  or  as  much  by  three  workmen  as  formerly 
by  thirty.  (Purchas,  Pilgrims,  iv,  1S66.  Bancroft,  History  of  the  United 
States,  I,  161.)  Even  in  New  England,  therefore  among  men  both  steady 
and  accustomed  to  labor,  who  for  conscience  sake  had  sacrificed  so  much,  a 
community  of  goods  was  accompanied  uninteruptedly  by  famine.  A  change 
for  the  better  took  place,  for  the  first  time  in  1623  with  the  introduction  of 
the  institution  of  private  property  which  was  followed  in  1624  by  the  right 
of  inheritance.  (Bancroft,  I,  340.)  The  military  colonies  of  Algeria,  also, 
in  which  husbandry  in  common  was  carried  on,  begged,  at  the  end  of  a  year, 
that  the  system  should  be  abandoned,  for  the  reason  tliat  it  was  good  for 
nothing  but  to  generate  idlers ;  and  yet,  these  colonists  were  all  powerful 
men  of  about  the  saine  age,  and  accustomed  to  order  and  service  in  conmion. 
They  were,  moreover,  assisted  by  the  nation  with  pay  and  food.  Compare 
Bugeaud's  account:  Revue  des  deux  Mondes,  June  i,  1848.  "The  French 
associations  (after  1848),  whose  object  was  labor  in  common,  have  nearly  all 
died  out."  M.  Chevalier  in  the  Journal  des  Debats,  Feb.  3,  1851.  In  the 
United  States,  sixteen  phalansteries  of  Fourierites,  founded  between  1840  and 
1S46,  had  all  collapsed  in  1S55.  (D.  Viertcljahrsschrift,  October,  1855,  205  fi".) 
5  Even  in  New  Harmony,  the  members  considered  the  task  which  they 
had  to  perform  to  obtain  food,  clothing  and  shelter,  as  villeinage  in  the  worst 
sense  of  the  term.  (H.  Bernliard  v.  Weimar,  Nordamerikan.  Reise,  V,  134 
ft". ;  151,  310,  ff".)  It  is  very  inconsistent  in  socialists  to  continue  the  propri- 
etorship and  heirship  of  the  state.  To  be  consistent  they  should  give  both 
these  rights  only  to  mankind  as  a  whole.  Compare  Kiraly,  Ueber  Socialis- 
mus  und  Comm.,  1S6S,  35. 


Sec.  LXXXI.]  COMMUNITY  OF  GOODS.  249 

code  viiliiairc  pronounces  sentence  of  death  on  the  violators  of 
its  provisions.  And,  as  a  matter  of  fact,  the  Miinster  x\nabap- 
tists  could  not  help  punishing  with  death  every  transgression 
of  their  communistic  precepts.*^  If,  in  a  community  in  which 
the  principles  of  communism  were  rigorously  carried  out,  all 
the  burthens  and  enjoyments  of  life  were  equal,  and  equally 
divided  according  to  the  ideas  of  the  crowd,  men  like  Thaer, 
Arkwright,  and  others  of  their  class,  who  now  provide  bread 
for  hundreds  of  thousands  from  their  studies  and  laboratories, 
would  then  be  able,  at  most,  with  a  rake  and  shovel,  to  provide 
food  for  three  or  four.  The  division  of  labor,  with  its  infinite 
amount  of  productive  force,  would,  for  the  most  part,  cease. 
Nor  would  the  consequence  be  that  the  humbler  classes  would 
be  freed  from  work  of  a  coarse,  mechanical,  unintellectual  and 
severe  nature;  but  that  the  higher  classes  would  be  dragged 
down  to  engage  in  it  likewise.  And  what  an  increase  there 
would  be  in  the  number  of  consumers  at  the  same  time! 
Every  man  would,  with  a  light  heart,  follow  the  most  impe- 
rious of  human  impulses  if  the  whole  community  were  to 
educate  his  children.  But  we  have  seen  that  a  community  of 
goods  is  desired  most  urgently  in  times  of  over-population. 
Hence,  here  it  would  make  the  evil  greater  yet,  by  increasing 
consumption  and  diminishing  production. 

Where  there  are  now  one  thousand  wealthy  persons,  and  one 
hundred  thousand  proletarians,  there  would  be,  after  one  gen- 
eration, no  one  wealthy  and  two  hundred  thousand  proleta- 
rians.   Misery  and  want  would  be  universal."    For  the  purpose 

^  It  would  not  be  entirely  fair  to  take  a  partisan  view  of  the  ateliers  naiion- 
aiix  of  1S4S,  and  claim  them  as  a  practical  refutation  of  socialistic  Utopias, 
since  no  serious  experiment  was  made  with  them.  Compare  E-  Thomas, 
Histoire  dcs  Ateliers  nationaux  consider^s  sous  le  double  Point  de  Vuc  polit- 
ique et  social,  1S48. 

'  Socialists  generally  overlook  the  fact,  that  the  greater  number  of  enjoy- 
ments from  which  the  poorer  classes  are  excluded,  by  the  right  of  property, 
would  not  exist  at  all  were  it  not  for  that  very  right.  (Spiitler,  Politik,  356  ft'.) 
This  remark  may  also  be  made  of  Hugo's  ingenious  objections.  (Naturrecht, 
§  20S  ft".)     One  of  the  most  effective  pieces  of  socialistic  declamation  is 


250  PRODUCTION  OF  GOODS.  [B.  T,  Ch.  V. 

of  giving  the  crowd  a  very  agreeable,^  but  rather  short-lived 
period  of  pleasure,  a  period  simply  of  transition,  almost  all 
that  constitutes  the  wealth  of  a  nation,  all  the  higher  goods  of 
life,  would  have  to  be  cast  to  the  waves,  and  henceforth  all 
men  would  have  to  content  themselves  with  the  gratifications 
afforded  by  potatoes,  brandy  and  the  pleasures  of  the  most 
sensual  of  appetites.  And  then,  the  equal  education  of  all, 
demanded  by  the  communists,  would  have  no  result  but  this, 
that  no  one  would  acquire  a  higher  scientific  training.^  But, 
after  all,  there  lurks  concealed  in  communism  much  more  of 
envy  than  is  generally  supposed. 

that  the  lower  classes  have  a  much  shorter  average  of  life  than  the  upper. 
Hence  the  institution  of  private  property  is  charged  with  being  a  species  of 
spoliation  of  the  poor  of  so  many  years  of  life,  and  the  entire  "  present  soci- 
ety "  condemned  oft  that  account.  Here  again  it  is  not  borne  in  mind,  that 
a  few  centuries  ago  the  general  average  of  life  was  probably  still  smaller ; 
and  that  it  was  precisely  the  growth  and  development  of  "  present  society  " 
that  lengthened  the  days  of  the  poorer  classes  erven,  although  it  may  have 
lengthened  those  of  the  rich  in  a  still  greater  proportion.     See  §  246. 

s  But  a  community  of  goods  would  not,  by  a  great  deal,  accomplish  as 
much  as  is  generally  supposed.  In  Prussia,  for  instance,  in  1867,  only  about 
three  per  cent,  of  the  entire  number  of  families  in  the  community  had  a 
yearly  income  of  1,000  thalers;  only  nine  per  cent,  had  500  thalers  or  more, 
and  only  6,465  returned  an  income  of  more  than  4,000  thalers,  while  only 
590  i-eturned  one  of  16,000  thalers.  (Preuss.  statist.  Ztschr.,  1S68,  83.  Held., 
Die  Einkommensteuer,  197  ft'.)  How  little,  therefore,  could  the  poor  here 
gain  by  the  spoliation  of  the  rich!  Besides,  the  parely  personal  consump- 
tion of  the  rich  is,  after  all,  not  so  great;  and  if  all  luxury  were  abandoned, 
an  innumerable  number  of  men  would  lose  their  gains.  (Compare  Ad. 
Smith,  Wealth  of  Nations,  I,  ch.  11,  2.)  It  would  be  to  kill  the  hen  that  had 
hitherto  laid  the  golden  egg  in  order  to  divide  its  flesh  a  little  more  equally. 

5  Babeuf  declared  all  arts  and  sciences  to  be  evils.  He  would  have  no  one 
learn  anything  but  Reading,  Writing,  Arithmetic,  and  a  little  of  the  Geog- 
raphy of  France ;  and  have  the  strictest  censorship  enforced  to  keep  every 
one  within  these  limits.  Compare  the  able  criticism  of  Proudhon^  Contra- 
dictions, ch.  12. 


Sec.  LXXXIL]     THE  ORGANIZATION  OF  LABOR.  251 

SECTION  LXXXIL 

THE  ORGANIZATION  OF  LABOR. 

Most  theoretical  adherents  of  the  doctrine  of  a  community 
of  goods,  feeling^  more  or  less  the  weight  of  the  above  ob- 
jections, have  supplemented  it  witli  the  idea  of  an  organization 
of  labor  ^  or  the  centralized  superintendence  of  all  production 
and  consumption,  either  by  the  government  already  existing, 
or  by  one  to  be  created  anew.  Such  a  government  would  be, 
of  course,  a  despotism  such  as  the  world  has  scarcely  yet  seen, 
a  Caesaro-Papacy,  usurping  both  tlie  place  and  power  of  Father 
of  the  universal  Family.^  But  the  evils  mentioned  above 
would  be  entailed  none  the  less.     Every  incentive  which  now 

^  According  to  Umpfenbach,  Nationalokonomie,  .201,  where  a  community  of 
goods  obtains,  there  can  be  but  the  alternative,  viz. :  whether  eacli  person  or 
each  family  shall  receive  just  the  same  amount.  (The  former  would  be  more 
in  harmony  with  principle,  but  what  an  over-population  would  be  the  conse- 
quence!) Precisely  so,  too,  if  each  person  were  to  come  and  take  his  own 
portion  (anarchy !),  or  if  it  were  parcelled  out  to  each  by  a  board  of  distrib- 
utors (despotism !). 

^  This  expression  came  into  vogue,  principally,  through  L.  Blanc,  Organi- 
zation du  Travail  (1S41),  the  leading  ideas  in  which  work  ai'C  the  following: 
The  suppression  of  competition  by  the  establishment  of  state  industries; 
equality  of  remuneration  for  labor;  equality  and  legislative  determination  of 
the  rate  of  interest;  the  choice  of  superintendents  by  the  workmen.  With 
many  modern  socialists,  the  shibboleth  is  not  so  much  liberte  as  solidarite. 
Besides,  Fielders  Naturrecht  (1796),  and  his  geschlossener  Handelsstaat,  are, 
without  doubt,  among  the  most  remarkable  works  favoring  an  "  organization 
of  labor."  They  aim  at  the  destruction  of  the  present  social  system,  which,  at 
most,  needs  only  to  be  reformed  and  rejuvenated;  and  to  galvanize  the  dead 
body  into  a  new  and  different  life  (Medea's  magic  cauldron !).  Compare 
Corvaja,  Bancocrazia  o  il  gran  Libro  sociale,  1S40. 

2  Cabet's  Icarian  colony  in  America  numbered  29S  adults  and  only  107 
children.  Yet  spite  of  this  condition,  so  favorable  to  production,  it  did  but  a 
very  sorry  busmess.  Its  government  was  very  similar  to  that  of  a  house  of 
correction  or  a  penitentiary.  Even  in  religious  matters,  spite  of  all  pretended 
toleration,  those  members  who  did  not  agree  with  Cabet  were  described  in 
the  official  weekly  paper  as  des  infames  on  dcs  avcuglcs.  (D.  Vierteljahrs- 
schrift,  1855,  October,  205  ff. 


252  PRODUCTION  OF  GOODS.  [B.  I,  Ch  V 

moves  man  to  industry  or  frugality  would  disappear,  and  noth- 
ing remain  but  universal  pliilanthrophy ;  or,  if  you  will,  but  pat- 
riotism, virtues  which  are  not  wanting  even  now.  Even  guard- 
ianship of  the  government  newly  created  would  be  carried  on 
in  a  very  loose  manner;  for  it  would  be  exercised  without  any 
feeling  of  personal  interest,  even  in  the  most  favorable  case 
supposable.  It  is  well  known  and  easily  understood,  that 
state  industries  are  never  engaged  in,  in  the  long  run,  with  the 
same  zeal,  nor  crowned  with  the  same  same  success,  as  com- 
peting private  industries.  It  is  well  known,  too,  how  intimate 
the  connection  is  between  the  political  freedom  of  a  people  and 
their  economic  production ;  that,  for  instance,  England's  greater 
wealth,  as  compared  with  that  of  Turkey,  depends,  most 
largely,  on  the  freedom  that  obtains  in  the  former  country 
and  the  servitude  that  prevails  in  the  latter.^  And  we  may  in- 
quire just  here,  what  the  result  would  be,  if  the  despotism  of 
government  should  go  ten  times  farther  that  it  has  ever  gone 
in  Turkey,  when,  moreover,  the  despot  who  led  the  state,  was 
not  an  individual  with  his  few  officials,  but  the  whole  crowd, 
with  its  million  eyes  and  million  hands.  It  would,  practicall}'', 
be  to  give  every  producer  an  escort  of  a  policeman  and  a  rev- 
enue agent,  as  if  he  were-  a  prisoner. 

And  where  would  be  the  gain?  A  division  of  wealth 
which  would  seem  unjust  to  many  would  exist  now  as  well  as 
before,  because  the  idle  and  the  unskillful  would  receive  the 
same  reward  as  the  most  industrious  and  skillful.^  The  op- 
position of  one  class  of  society  to  another,  so  much  complained 

•*An  eastern  sage  says,  that  land  possesses  the  ideal  of  legal  security 
through  which  a  beautiful  woman,  decked  with  pearls,  might  travel  without 
danger.  What  would  such  a  sage  say  of  a  European  country,  in  which  even 
orphan  children  have  their  property  not  only  preserved  to  them,  but  find  it 
increased  from  having  been  placed  at  interest,  as  soon  as  they  reach  their 
majority.''     (Barrovj.) 

5  "  The  equality  of  communism  is  the  worst  species  of  inequality,  because 
it  guaranties  to  one  for  two  hours  of  poor  labor  as  n:iuch  as  it  does  to  an 
other  for  four  hours  of  good  work."  (Basiiat,  Harmonies  dconomiques, 
ch.  S.) 


Sec.  LXXXIIL]        THE  ORGANIZATION  OF  LABOR.  053 

of,  would  continue.  The  only  difference  would  be,  that 
whereas,  it  now  comes  from  the  weak,  it  would  then  come 
from  the  strong."  Compulsory  association  is  certainly  more 
prolilic  in  strife  and  crime  than  is  a  state  of  society  in  which 
everybod}^  manages  his  own  affairs. 

A  journey  on  foot,  in  company  with  others,  is  allowed,  on 
all  hands,  to  be  a  very  good  test  of  friendship.  But,  a  com- 
munity of  goods  would,  in  the  strictest  sense  of  the  word, 
be  a  journey  on  foot  through  the  whole  of  life  with  number- 
less "friends."  Here,  every  one  would  believe  himself  enti- 
tled to  possess  whatever  pleased  him.  And,  who  would  de- 
cide; since  so  many  communists  preach  the  dissolution  and 
extinction  of  all  government,  and  the  reign  of  anarchy?  Be- 
sides, there  can  be  no  doubt,  that  the  difference  of  human 
talents  and  human  wants,  would  soon,  spite  of  every  law,  lead 
to  a  difference  in  property  again.  Hence,  that  first  revolution 
would  have  to  be  repeated  from  time  to  time  —  a  real  Sisyphus 
labor!  No  sooner  have  the  bees  produced  anything,  than  the 
drones  come,  and  divide  anew! 

SECTION   LXXXIIL 

THE  ORGANIZATION  OF  LABOR. 

[COXTISrED.] 

Experience,  however,  teaches  us,  that,  in  all  the  lower  stages 
of  civilization,  a  community  of  goods  exists  to  a  greater  or 
lesser  extent.^  The  institution  of  private  property  has  been 
more  fully  evolved  out  of  this  condition  of  things,  onl}^  in  pro- 
portion as  well-being  and  culture  have  been  developed  as  cause 
and  effect  of  such  well-being.  Thus,  among  most  nations  of 
hunters  and  fishermen,  the  idea  of  private  property  was  un- 

^ Proudhon^  Qu'est-ce  que  la  Propriety,  2S3,  says,  very  justly,  that  "a  com- 
munity of  goods  is  the  spoliation  of  the  strong  by  the  weak." 

'  Called  a  negative  community  of  goods,  by  Zaccharici,  Vierzig  Blicher  vom 
Staate,  IV,  146,  in  contradistinction  to  the  positive  and  universal  community 
of  gain,  as  desired  by  the  communists. 


254  PRODUCTION  OF  GOODS.  [B.  I,  Ch.  V. 

known  when  these  nations  were  first  discovered.  This  is, 
indeed,  very  natural.  Their  chief  spring  of  production  flows 
as  if  of  itself,  apparantly  inexhaustible ;  and  the  hunter  can 
hardly  think  of  such  a  thing  as  saving  any  of  his  booty .^  And, 
among  nomadic  nations,  the  land  is  a  great  meadow  held 
in  common;  and  the  industry  of  plunder  is  considered,  as 
it  is  in  all  inferior  stages  of  civilization,  especially  honora- 
ble.^ The  conqiiistadores  of  Peru  found  there  something  very 
like  a  community  of  goods,  under  the  despotic  guardianship 
of  the  state,  viz.:  a  yearly  division  of  all  lands  among  the 
people,  in  proportion  to  their  rank;  the  cultivation  of  these 
lands  in  common,  under  the  superintendence  of  the  state,  and 
to  the  sound  of  music.  But,  at  the  stage  of  civilization  that 
Peru  was  then  in,  land  is  about  the  only  resource  possessed. 
The  results  were  the  usual  ones.    A  country  like  Peru,  with 

'^  Comirlunitj  of  goods  and  of  women  among  the  Ichthyophages  on  the  Red 
Sea,  who  lived  in  caves,  went  naked  for  the  most  part,  plundered  all  ship- 
wrecked people,  and  never  reached  an  advanced  age.  Diodor.^  Ill,  15  if. 
Peripl.^  Maris  Erythr.,  12.  Concerning  the  Scythians,  see  Strabo^  VII,  300; 
the  Spaniards,  P/^i/rtrc/;,  Marius,  6;  the  Rhetians,  ZJw  Cass.  LIV,  23;  the 
Triballi,  Isoa\,  Panath.,  §  237;  the  Kilici,  Sext.^  Empir.  P^'rrh.  Hypot.  Ill, 
24.  Community  of  goods  among  the  Caribs  who  performed  all  their  work 
in  common,  and  had,  at  least  in  the  case  of  males,  a  common  table  and 
common  stores  with  supplies.  (Petr.  Martyr.,  Dec.  VII,  i.  Rockefort,  II, 
c.  16.  B.  Edtvards.,  History  of  the  West  Indies,  I,  43  ff.)  Among  the  Kus- 
kowimers  of  Russian  America,  all  the  able-bodied  men  of  the  tribe  live  to- 
gether. (  V.  Wrangell.,  Nachrichten,  129.)  Among  the  inhabitants  of  the 
Aleutian  islands,  at  least  in  times  of  scarcity  of  food,  the  produce  of  the 
fisheries  is  divided  according  to  their  need.  (V.  Wrati£-ell,  iS^.)  The  or- 
ganization of  labor  is  rigidly  enforced  among  the  Otomacs,  on  the  banks  of 
the  Orinoco,  and  they  are,  nevertheless,  more  civilized  than  their  neighbors. 
(DeJ>ons,  Voyage,  I,  295.)  A  community  of  goods  must,  however,  be  con- 
sidered an  advance,  in  the  case  of  an  isolated  people ;  and  it  is  an  error  to 
look  upon  it  as  the  most  primitive  condition,  as  does,  for  instance,  Avidrosiits, 
De  off.  Minist.  I,  28,  and  Frederick  //,  in  the  preface  to  his  general  code. 
(Allgemein.  Gesetzbuche,  1231.)  The  hospitality  of  the  inhabitants  of  the 
Friendly  Islands  borders  on  a  community  of  goods.  (Mariner,  Freund- 
schaftsinseln,  75,  Si.  Klemm,  Kulturgeschichte,  IV,  398.)  Concerning  the 
beginnings  of  property  among  the  Esquimaux,  See  Klemm,  II,  294. 

(Didytn.,  ad  Odyss.  II,  73,  IX,  252.) 


Sec.LXXXIII.]     the  organization  of  labor.  255 

only  one  city,  no  beasts  of  burthen,  no  plows,  no  trades  and 
no  commerce,  cannot  possibly  be  rich.*  That  the  constitu- 
tion of  L3'curgus  established  a  sort  of  community  of  goods 
among  the  Spartans,  is  well  known.  I  need  only  recall  the 
public  education,  the  meals  in  common,  the  authorization  of 
stealing,^  the  prohibition  of  trade,  of  the  precious  metals  and 
fine  furniture,  the  equal  division  of  property  and  the  inaliena- 
ble character  of  the  land "  etc.  With  such  laws,  Sparta  could 
neither  be,  nor  desire  to  become,  wealth}-.  Of  all  Greek 
states  of  any  historical  importance,  it  preserved  longest  the 
economic  peculiarities  belonging  to  a  low  stage  of  civiliza- 
tion. Among  most  modern  nations,  the  fundamental  idea  of 
their  land  laws,  which  had  their  origin  in  the  middle  ages,  is, 
that  each  family  is  only  the  usufructuary,  and  that  the  com- 
munity is  the  sovereign  proprietor  of  the  soil.  This  community 
of  landed  possession  finds  expression,  among  other  things,  in 
the  vast  extent  of  communal  woods  and  pasturages,  in  the 
varied  intersecting  of  parcels  of  land  one  by  the  other,  W'hich, 
indeed,  change  proprietors  from  time  to  time,  and  in  the  com- 

*  In  Mexico,  the  Spaniards  found  land  ownership  among  the  most  distin- 
guished of  the  natives,  but  only  a  species  of  possession  in  common  and 
common  store  houses  among  tlie  peasantry.  (Robertson^  History  of  Amer- 
ica, §  VII.)  Hence,  tlie  agriculture  of  the  country  -was  so  unimportant  that 
the  little  army  of  the  conquistadorcs  frequently  produced  a  fa^iine  by  their 
marches. 

5  The  Tcherkesses  considered  robbery  honorable  provided  the  robber  was 
not  caught  in  flagrante.  Compare  Koch,  Reise  in  den  kaukasischen  Isth- 
mus, I,  370  ff.  Bell,  Journal  of  a  Residence  in  Circassia,  I,  181,  II,  201. 
The  organized  robber  bands  of  ancient  Egypt,  when  it  was  so  highly  civil- 
ized (Diodor.,  I,  80)  may,  on  the  other  hand,  be  accounted  for  by  similar  con- 
ditions actually  existing  in  the  large  cities  of  our  own  day. 

"'What  a  frightful  organization  of  labor  we  find  in  Sparta,  combined  with 
a  community  of  goods !  Let  us  recall  the  exposing  of  children  authorized 
by  law,  the  mode  of  education  which  must  have  cost  the  life  of  all  whose 
constitution  was  weak,  the  cryftia,  the  stern  hierarchy  of  age  etc.  Pint., 
Inst.  Lac.  2,  appreciates  the  bad  taste  of  the  black  broth  at  its  true  value. 
The  Cretan  community  of  goods  was  based  chiefly  on  the  unnatural  rela- 
tion created  by  the  authorities  known  as  paideraslia ;  and  which  was  a  very 
efficient  means  to  prevent  over-population.  (Plat.,  De  Legg,  1, 636.  Artsi., 
Polit.  II,  8.) 


256  PRODUCTION  OF  GOODS.  [B.  I,  Ch.  V 

mon  working  of  the  land,  carried  as  far  as  possible  etc'  In 
all  medieval  times,^  not  only  the  individual  is  considered  an 
owner  of  the  land,  but,  over  and  above  him,  the  family.  At 
the  same  time,  we  are  wont  to  find  existing  an  amount  of 
mortmain  property  in  the  hands  of  corporations,  monastery 
lands,  crown  lands  and  domains  of  very  great  importance.^ 
All  these  institutions  have  declined  in  number  and  shown  a 
disposition  to  disappear,  in  proportion  as  national  husbandry 
or  economy  has  grown  more  productive. 


SECTION   LXXXIV. 

THE  ORGANIZATION  OF  LABOR. 

[CONTINUED.] 

To  this  tendency  we  find,  indeed,  another,  and  a  no  less 
powerful  one,  opposed.  Everywhere  as  civilization  advances, 
the  sphere  of  action  of  the  state  grows  larger,  and  the  ends 
it  serves  more  numerous. 

In  its  origin,  government  was  established  to  preserve  only 
the  external  security  of  its  subjects.  By  degrees,  it  comes  to 
look  after  their  internal  legal  security,  b}"  enforcing  internal 
peace,  prohibiting  revenge  for  bloodshed  etc.  It  next  extends 
its  care  to  the  well-being,  the  culture,  and  even  to  the  comfort 
of  the  people.  But  the  claims  of  the  state  must  grow  in  the 
same  proportion  as  the  service  it  renders.  While  Lowe,  in 
1822,  estimated  the  yearly  net  income  of  the  British  people  at 

''  Remarkable  reasons  therefor  in  Cc^sar,  Bell.  Gall.,  VI,  32. 

8  There  are,  especially  in  Russia,  a  multitude  of  such  institutions  among 
the  inhabitants  of  the  country  still.  See  Roscher^  Nationalokonomik  des 
Ackerbaues,  §  71  ft". 

'  In  the  Corpus  Juris  Canonici,  that  crown  of  medieval  theology,  politics 
and  jurisprudence,  the  ideal  of  a  community  of  goods  occupies  a  place 
almost  as  prominent  as  in  the  works  of  modern  socialists.  The  only  difler- 
ence  is,  that  in  the  former  the  opposition  to  private  property  arises  from  a 
one-sided  religiousness  and  contempt  of  the  world,  while,  in  the  latter,  it 
arises  generally  from  irreligiousness  and  over-estimation  of  worldly  goods. 


Sec.  LXXXIV.]    THE  ORGANIZATION  OF  LABOR.  257 

£25i,ooo,cxxd;  the  government  expenses,^  in  1813  and  1814, 
averaged  £106,000,000,  and  these  sums  were  vohmtarily  de- 
voted to  public  purposes  by  parliament.     And  so,  between 
1685  and  1841,  the  population  of  England  more  than  trebled 
its  numbers,     But,  in  the  same  period  of  time,  the  outlay  of 
the  state  increased  forty  fold.     (Macaiilay.)     Simultaneously 
with  this  development  of  things,  it  becomes  more  and  more 
usual  by  the  exercise  of  the  power  of  eminent  domain  and 
others  like  it,  to  sacrifice  private  rights,  acquired  by  the  very 
best  of  titles,  to   the   preponderating   common   good.      We 
may   allude,   further,   to   the    duty,   imiversally  imposed   in 
modern  times,  of  performing  military  service,  to  the  national 
systems  of  public  instruction  in  so  many  countries;   to  the 
large  number  of  societies,  joint-stock  companies,  popular  holi- 
days;  but   particularly  to  the  associations  for  insurance  of 
every  description.     And  so  it  may,  indeed,  be  claimed  that  we 
have  come  nearer  to  a  community  of  goods  than  could  have 
been  dreamed  of  a  hundred  years  ago.~     And  yet,  these  are, 
for  the  most  part,  institutions  in  which  we  find  reflected  the 
peculiar  strength  and  solidity  of  our  age.     Whoever  wishes  to 
compare  the  power  of  one  people  with  that  of  another,  must 
take  into  account  not  only  the  elements  which  constitute  their 
intellectual  and  physical  force,  but  especially  their  inclination 
to  permit  these  elements  to  cooperate  for  public  purposes.^ 

1  This  does  not  include  the  cost  of  the  schools,  churches  and  benevolent  in- 
stitutions. 

"^  According  to  Lassallc,  System  der  erworbenen  Rechte,  1S61,  §  259,  his- 
tory shows  that  law,  as  civilization  advances,  curtails  more  and  more  the 
proprietary  sphere  of  private  individuals,  inasmuch  as  it  tends  more  and 
more  to  place  a  greater  number  of  objects  outside  the  circle  of  individual 
ownership. 

3  Saint  Simonism  is  a  warning  example  of  this  tendency.  Saint  Simon 
never  lost  an  opportunity  to  give  vent  to  his  utter  contempt  for  the  liberals, 
and  for  constitutional  government  —  ce  bdtard  du  regime  fiodal  et  dii  regime 
indiistricl;  and  to  counsel  the  crown,  after  the  example  of  Louis  XL  to  place 
itself  at  the  head  of  the  working  class,  and  in  opposition  to  the  middle  class. 
(Oeuvres  de  Saint  Simon,  €d.  1S41,  44,  14S,  209.)  Bazard,  Exposition,  76,  de- 
manded that  all  antagonism  between  the  temporal  and  spiritual  powers,  all 
Vol.  I.— 17 


25S  PRODUCTION  OF  GOODS.  [B.  I,  Cii.  V. 

We  may  now  inquire:  At  what  point  does  this  increasing 
community  cease  to  be  a  gain?  This  is  as  easily  determined 
generally,  as  it  is  difficult  to  say  what  the  limit  to  it  is  in  par- 
ticular instances.  Progress  in  the  direction  of  a  community 
of  interests  of  this  nature  is  beneficial,  only  so  long  but  cer- 
tainly as  long  as  it  corresponds  with  the  feeling  entertained  by 
the  community,  that  they  have  interests  in  common.  Hence  it 
is,  that  such  a  noble  kind  of  communism  reigns  in  art  and  lit- 
erature, one  which  causes  the  stronger  to  willingly  labor  for  the 
weaker,  and  with  the  greatest  success.^  And  so,  too,  the  chris- 
tian care  of  the  poor,  even  were  it  carried  to  the  height  of  the 
Gospel  counsels  (Luke,  3:11),  would  be  no  direct  obstacle  in 
the  way  of  the  development  of  a  nation's  public  economy,  pro- 
vided it  were  given,  and  accepted,  only  as  christian  benevo- 
lence. Every  approximation  towards  a  community  of  goods 
should  be  effected  by  the  love  of  the  rich  for  the  poor,  not  by 
the  hatred  of  the  poor  for  the  rich.  If  all  men  were  true 
Christians,  a  community  of  goods  might  exist  without  danger. 
But  then,  also,  the  institution  of  private  property  would  have 
no  dark  side  to  it.  Every  employer  would  give  his  work- 
men the  highest  wages  possible,  and  demand  in  return  only 
the  smallest  possible  sacrifice.^  ^ 

opposition  for  the  sake  of  freedom,  tu^fauce  organisee  of  parliaments,  and  all 
competition,  should  cease.  Even  education  he  would  have  bestowed  according 
to  capacity,  which  he  would  have  determined  by  the  c/iefs  Ugitimes  de  la 
socidti  (280).  To  the  criminal  court  should  be  referred  all  cases  of  delicts,  that 
is,  all  inopportune  acts,  even  in  the  scientific  and  artistic  departments.  They 
should  be  tried  after  the  manner  of  the  "courts  of  trade; "  that  is,  in  a  sum- 
mary way,  without  appeal,  and  by  experts  (317  fF).  All  the  relations  of  prop- 
erty should  be  determined  by  the  decision  arbitrale  des  chefs  d  Industrie  (326). 
Bazard  everywhere  insists  that  the  reign  of  genius  and  of  self-sacrifice  on  the 
one  hand,  and  on  the  other  of  confidence  and  obedience,  is  the  only  true  pol- 
icy (330).     Saint  Simonism  was  nearly  related  to  Bonapartism. 

"^Schdffle,  Nat.  CEk.,  Ill,  Aufl.,  I,  61. 

5  If  we  remove  in  thought,  all  injurious  elements  from  a  community  of 
goods,  and  add  to  it  all  the  incentives  and  restraints  necessary  to  be  added, 
we  shall  have  a  state  of  things  entirely  similar  to  that  in  a  nation  whose  pub- 
lic and  private  affairs  arc  carried  on  in  accordance  with  the  principles  of  a 


Sec.  LXXXV.J      THE  RIGHT  OF  INHERITANCE.  259 

SECTION  LXXXV. 

THE  RIGHT  OF  INHERITANCE. 

The  right  of  inheritance  to  resources  has  its  origin  in  a  com- 
bination of  the  idea  of  the  family  with  the  idea  of  property. 
And,  indeed,  this  combination  of  ideas  is  a  very  natural  one. 
The  larger  portion  of  mankind  consider  the  pleasures  of  the 
family  as  the  highest  attainable,  and  endeavor,  whenever  their 
economic  means  make  it  at  all  possible,  to  secure  them.  At 
the  same  time,  the  selfishness  of  most  men  is  not  confined  to 
their  own  persons,  but  extends  also  to  their  posterity.  Hence 
it  is  that  bed  and  board,  connubimn  and  commercium,  have, 
from  time  immemorial,  been  considered  correlative  ideas;  and, 
to  all  the  more  logical  socialists,  a  community  of  wives  (or 
celibacy)  ^  is  as  dear  as  a  community  of  goods.^  (§  245.)  And 
in  practice,  the  greater  number  of  nations  of  hunters,  who, 
according  to  our  conceptions,  have  no  knowledge  of  a  real 
family  and  no  knowledge  of  property,  have  a  custom  of  bury- 
ing with  the  dead  the  things  they  used,  to  kill  their  cattle  etc., 
or  to  deprive  minor  children  of  their  inheritance.^ 

healthy  system  of  Political  Economy  as  understood  to-day.     (Edinburgh 
Review,  January,  1851.) 

^  How  true  freedom  is  accompanied  by  what  Bastiat  calls  "  true  Saint 
Simonism  and  true  communism,"  see  infra,  §  210. 

'  The  experiments  of  a  community  of  goods,  which  have  proved  successful 
in  practice,  were  all  based  on  the  more  or  less  complete  celibacj^of  the  mem- 
bers of  the  societies.     Compare  Hermann,  Staatsw.  Unters.,  II,  Avifl.,  45. 

^  Thus  Proudhon  (Contradictions,  ch.  5)  says  that  the  many  socialists,  who 
would  construct  their  societies  after  the  type  of  the  family,  as  the  inohcule 
organique,  are  all  wrong.  The  family  has  a  "  monarchical,  patriarchal"  char- 
acter. In  it,  the  principle  of  authority  is  formed  and  preserved.  On  it,  an- 
cient and  feudal  society  was  based ;  and  "  precisely  against  this  old  patriarchal 
constitution,  modern  democracy  protests  and  revolts."  Fourier  calls  mar- 
riage, tin  groiife  essenticllement  faux :  faux  far  le  nombre  borni  d  deux,  far 
I  ''absence  de  libertd  et  par  les  dissidenccs  du  goTit,  qui  iclatcnt  des  le  fremier  jour. 
(Nouveau  Monde,  57.) 

2  On  the  Indians  of  North  America,  see  6'c//w//'({/?,  Information  respect- 
ing the  Indian  Tribes  of  the  United  States,  II,  194;  on  the  South  American 


260  PRODUCTION  OF  GOODS.  [B.  I,  Ch.  V. 

SECTION   LXXXVI. 

ECONOMIC  UTILITY  OF  THE  RIGHT  OF  INHERITANCE. 

The  certainty,  that  the  material  welfare  of  their  children  de- 
pends, in  great  part,  on  their  industry  and  frugality,  is  one  of 
the  most  powerful  incentives  to  good,  in  the  case  of  most 
men.  And  this  is  the  basis  of  the  economic  utility  of  the  fam- 
ily right  of  inheritance.^  There  is  scarcely  any  other  institu- 
tion which  opposes  over-population  with  such  efficiency,  for 
the  reason,  that  the  obstacle  placed  in  its  way  here  is  placed 
very  directly,  at  the  point  where  it  can  make  itself  felt  most, 
viz. :  in  the  life  of  the  family  itself.  The  weaker  the  family  feel- 
ing, the  less  does  the  abolition  of  the  right  of  inheritance  inter- 
fere with  the  economic  interests  of  a  nation.  Hence,  for  in- 
stance, it  is,  that  taxes  imposed  upon  legacies,  bequests,  testa- 
mentary gifts  etc.,  are  less  objectionable  in  proportion  as  they 
affect  only  those  in  the  more  remote  degrees  of  relationship 
in  which  inheritance  is  something  merely  accidental.  While, 
when  a  nation  is  yet  in  the  intermediate  stages  of  civilization, 
the  family  right  of  inheritance  seems  to  be  very  strong, 
especially  as  regards  landed  property,  a  consequence  of  the 
fact,  that  a  superior  kind  of  title  to  such  property  is  recog- 
nized to  exist  in  the  family;  at  a  period,  when  individualism 
becomes  more  developed,  the  liberty  of  devise  by  wiU  is  wont 
to  prevail  more  and  more.^     Then  the  right  of  inheritance  be- 

d^Orb{g}iy,Yoya.ge^  IV,  220,  and  passim,  on  the  South  Sea  Islanders,  theNo- 
vara-  Reise,  II,  418;  on  the  ancient  Albanians,  Sirabo,  XI,  503. 

'  The  hereditary  transmission  of  property  to  posterity  has  an  obvious  ten- 
dency to  make  a  man  a  good  citizen.  It  ranges  his  passions  on  the  side  of 
duty,  and  induces  him  to  make  himself  profit  the  common  good,  and  it  as- 
sures him  that  his  reward  shall  not  die  with  himself,  but  that  it  shall  be 
handed  down  to  those  to  whom  he  is  joined  by  the  dearest  and  most  tender 
feelings.  (See  Blackstone's  Commentaries,  II,  11.)  Without  the  right  of  in- 
heritance, credit  is  scarcely  possible,  since  with  the  death  of  the  debtor  the 
only  stay  of  the  creditor  would  cease. 

=  Testamentary  freedom  (which  obtained  in  places  there  about  the  begin- 


Sec.  LXXXVL]        RIGHT  OF  INHERITANCE.  261 

comes,  so  to  speak,  a  more  elevated  species  of  personal  prop- 
erty, a  prolongation  of  the  same  beyond  the  grave.  Should 
testamentary  freedom  be  too  much  hampered,  selfishness  v^ould 
manifest  itself  in  a  way  much  more  detrimental  to  economic 
interests,  viz. :  in  the  consumption  of  wealth,  during  the  life- 
time of  its  owner.  Every  man  would  be  but  a  life  annuitant 
of  his  own  property. 

But,  at  the  same  time,  in  periods  of  moral  decline,  complete 
freedom  may  degenerate  so  as  to  produce  evils  equally  great. 
The  wealthy  Boeotians,  in  the  later  days  of  Hellenic  history, 
were  wont  to  form  themselves  into  dissolute  drinking  com- 
panies ;  and  not  only  the  childless,  but  even  fathers  of  families 
made  over  their  property  to  these  companies,  limiting  their 
offspring  to  a  portion  which  it  was  made  their  duty  to  let  them 
have.  It  was  so  in  Rome,  also,  in  Cicero's  time,  when  every 
acquaintance  of  standing  took  it  very  ill  if  not  remembered  in 
the  will  of  the  testator,  and  where  Octavian,  for  instance,  in 
the  last  twenty  years  of  his  reign,  received  about  70,000,000 
thalers  through  legacies  left  him  by  his  "friends."^     Here, 

ning  of  the  eighteenth  century)  prevails  completely  in  England  at  present, 
contrary  to  the  principle  of  the  Roman  law  requiring  an  obligatory  portion 
(la  legitime)  to  be  left  to  the  heirs,  which  is  still  binding  in  France,  but  in  a 
very  much  developed  form.  The  consequence  is  that  last  testaments  are  as 
frequent  in  England  as  they  are  rare  in  France.  There  were,  in  Paris,  in 
1825,  7,649  judicial,  and  only  1,081  testamentary  partitions  of  property.  (Mou- 
nter.) In  Great  Britain,  in  1838,  the  number  of  testamentary  alienations  of 
property  taxed  stood  to  those  in  which  there  was  no  will,  in  the  proportion 
of  8:3;  and  the  values  of  the  alienated  property  as  10:1.  (Porter.)  Among 
a  people  noted  for  their  high  moral  tone,  testamentary  freedom  is  a  powerful 
means  of  strengthening  paternal  authority  on  the  one  hand,  and  of  keeping 
alive,  in  the  minds  of  parents,  on  the  other,  a  sense  of  responsibility  for  the 
future  of  their  children.  Compare  Helferich,  Tiibinger  Zeitschr.,  1854, 143,  fi. 
^Polyb.,  XX,  6.  Hence  it  was,  that  all  {?)  the  wealth  of  Thebes,  when  it 
was  destroyed  by  Alexander  the  Great,  was  only  440  talents.  (Athen.,  IV, 
148.)  Drumann,  Gesch.  Roms.  etc.,  VI,  333  ff.  Cicero,  Phil.,  II,  16.  Hoeck, 
Rom.  Gesch.,  I,  2, 118.  Siceton.,  Octav.,  66.  An  especially  scandalous  instance 
in  Petron.,  140.  For  a  masterly  theory  of  legacy  -  hunting,  see  Jlorat.,  Sat.,  II, 
5.  Compare  Lucian,  Dialogues  of  the  Dead,  5-9.  Peironitts  speaks  of  a  turba 
h(Bredipetarum.  (124.) 


262  PRODUCTION  OF  GOODS.  [B.  I,  Ch.  V. 

the  repeal  of  the  law  making  it  obligatory  on  testators  to  leave 
a  certain  proportion  of  their  wealth  to  their  children  would 
remove  the  last  safe-guard  of  their  material  welfare.* 


SECTION  LXXXVIL 

LANDED  PROPERTY. 

As  land,  in  its  uncultivated  state,  has  neither  been  produced 
by  man,  nor  can  be  entirely  consumed  by  him,  the  above  de- 
monstration of  the  necessity  of  private  property  cannot  with- 

*  Even  the  revolutionary  shibboleth,  faterniid,  really  means  nothing  more 
than  the  equal  right  of  inheritance  of  all,  i.  e.,  the  abolition  of  the  right  of  in- 
heritance! (R.  Meyer.)  The  strongest  attack,  from  a  scientific  point  of  view, 
made  on  the  right  of  inheritance  in  more  recent  times,  comes  froin  Saint  Si- 
monism.  The  founder  himself,  after  a  life  rich  in  experience  but  poor  in  ac- 
tion, spent  in  the  search  of  inuch  but  in  the  finding  of  little,  succeeded  only 
in  arraying  the  industrial  and  proprietary  classes  against  each  other,  in  de- 
claring the  poorest  class  to  be  the  most  important  of  all,  and  in  basing  the 
r\e^\ .religio?i  of  love  on  the  emancipation  of  labor.  His  disciples  went  fur- 
ther. In  order  to  abolish  all  the  privileges  of  birth,  Bazard,  Exposition  de  la 
Doctrine  de  Saint  Simon,  1831,  p.  172,  ff.,  taught  that  it  was  not  enough  to  dis- 
tribute public  employments  according  to  merit,  and  in  the  interest  of  the 
people  generally,  but  that  the  distribution  of  property  should  be  made  in 
accordance  with  the  same  principle.  The  inequality  of  ownership  should 
correspond  with  the  inequality  of  merit.  Every  one  may,  during  his  life, 
keep  what  he  had  acquired  himself,  but  give  it  to  the  state  at  death.  Thus 
would  a  reconciliation  be  effected  between  the  general  interest  and  private 
interest;  and  the  public  revenue,  supplied  in  this  Avay,  might  easily  be  em- 
ployed in  place  of  the  revenue  raised  by  such  taxation  as  weighs  most 
heavily  on  the  inferior  classes.  F.  Huei,  also,  Le  Regne  social  du  Christian- 
isme,  1853,  III,  5,  would  have  all  private  property,  after  the  death  of  the 
owner,  fall  igalement  d,  tous  les  jeunes  travailleurs.  The  practical  consequen- 
ces of  this  system  may  now  be  seen  in  Turkey.  There,  the  principal  mili- 
tary fiefs  are  held  in  this  way.  Hence  it  is,  that  the  Turkish  owner  of  such 
a  fief  builds  as  little  as  possible.  When  one  of  his  walls  threatens  to  fall,  it 
is  kept  standing  by  means  of  props.  If  it  falls  in  fact,  the  only  consequence 
is  that  there  are  fewer  rooms  in  the  house,  and  the  owner  settles  beside  the 
ruins.  (Denon,l,p.ig2)  ^^  the  Butan,  there  exists  a  species  of  practical 
Saint  Simonism.    liodinson,  Descriptive  Account  of  Assan,  1841. 


Sec.  LXXXVII.]  LANDED  PROPERTY.  2G3 

out  any  more  ado,  be  extended  to  land.^  Hence,  individual 
property  in  land  is  everywhere  much  more  recent  than  indi- 
vidual property  in  capital." 

But  a  certain  expenditure  of  capital  and  labor  is  necessary 
that  land  may  be  used  productively,  and,  in  most  instances, 
this  employment  of  capital  and  labor  is  of  long  duration,  irre- 
vocable in  the  very  nature  of  things,  and  one  the  fruits  of 
which  can  be  reaped  only  after  some  time  has  elapsed.  Now, 
this  cooperation  of  capital  and  labor  is  such,  that  no  one  would 
undertake  to  employ  them  in  the  cultivation  of  the  land,  had 
he  not  the  strongest  assurance  of  possessing  it.  Hence,  agri- 
culture in  its  most  rudimentary  stage  supposes  ownership  of 
the  land,  at  least  from  the  time  that  it  is  "  tickled  with  the 
hoe,"  until  it  "  smiles  with  the  harvest ; "  or,  to  express  it  more 
accurately,  all  the  time  intervening  between  the  work  of  the 
plow  and  the  labor  of  the  sickle.  The  more,  afterwards, popu- 
lation and  civilization  increase,  the  more  products  must  be 
wrung  from  the  soil.  But  this  can  be  accomplished  only  by 
means  of  its  more  intensive  cultivation  (higher  farming),  by 
lavishing  a  greater  amount  of  capital  and  labor  on  it,  and,  as 
a  rule,  by  extending  the  circle  of  agricultural  operations  by 
means  of  combinations  more  and  more  artificial.  Hence,  the 
progress  of  civilization  demands  an  ever  increasing  fixity,  and 
a  more  pronounced  shaping  of  landed  propert}^  (the  sfccif  ca- 
tion of  jurists),  in  the  interests  of  all  w' ho  share  in  this  progress, 
and  even  of  those  who  own  no  landed  property  themselves. 
Were  there  no  property  in  land,  every  one  would  find  it  more 

*  It  was  chiefly  fear  of  the  consequences  of  the  declamations  of  the  socialists 
and  their  declamation  against  "monopoly  "  that  induced  Bastiatio  reduce  all 
the  value  of  landed  property  to  that  of  the  capital  employed  in  its  manuring, 
improvement  etc.  (Harmonies,  ch.  9.)  We  may,  however,  unreservedly 
grant  him  that,  as  a  rule,  until  the  time  of  its  original  possession  by  man,  land 
had  no  valeiir  whatever  (278). 

*Art«i! thinks  the  very  contrary:  Metaph.  Anfangsgriinde  der  Rechtslehre, 
(Werke,  IX,  72  ff).  Contra,  Groiius,  J.  B.  et  P.,  II,  2.  Gi-asruinkel,  in  his 
Schriften  fiir  die  Freiheit  des  Meeres,  1652  if.,  in  Laspeyrcs,  Geschichte  der 
niederlandischen  N.  CEk.,  12.     Hiifdaud,  Neue  Grundlegung,  I,  307. 


264:  PRODUCTION  OF  GOODS.    ;  [B.  I,  Ch.  V 

difficult  and  laborious  to  gratify  his  want  of  agricultural  pro- 
ducts;  ^  and  the  products  themselves  would  be  of  an  inferior 
kind. 

Thus,  for  instance,  in  Camargo,  the  lackmus  was  formerly 
prepared  from  plants  to  be  had  "  free  "  in  the  woods.  It  was 
then,  however,  much  dearer  than  it  is  now  that  the  plants  are 
artificially  raised  on  landed  property.*  It  is  otherwise  with 
the  fisheries.  The  appropriation  of  rivers  or  seas  would  not 
tend  to  increase  the  abundance  of  their  products,  and  hence 
this  appropriation  is,  on  the  whole,  rare.^ 

SECTION    LXXXVIII. 

LANDED  PROPERTY. 

(CONTINUED.) 

Whenever  this  admixture  of  capital  and  labor  with  land  has 
taken  place  to  no  great  extent,  private  property  in  land  is  not 
found  developed  in  any  degree.  Thus,  there  are  even  now 
many  half-civilized  countries  in  which  the  land  is  forfeited  be- 
cause not  tilled  for  many  years,  and  where  it  may  be  occupied 
by  the  first  person  who  will  cultivate  it.^     In  Europe,  common 

^ "  A  district  of  Tartary  of  ten  square  miles,  in  which  several  hordes  pas- 
ture their  flocks,  may  contain  between  400  and  500  shepherds,  who  find  em- 
ployment in  this  mode  of  production."  In  Brie,  in  France,  on  the  same  area, 
50,000  peasants  who  own  no  land,  live  and  draw  their  sole  income  from  their 
labors  in  the  fields  (J^.  B.  Say). 

*Schubcri^  Reise  durch  Frankreich  und  Italien,  I,  1S8. 

5  "  Without  labor,  the  earth  bestows  nothing  on  man  but  a  stopping  place. 
Hence,  the  reasons  for  private  property  do  not  extend  so  far  as  to  prove  that 
the  great  land  and  water  highways  should  not  be  reserved  as  common  prop- 
erty, and  as  a  home  to  every  man."     (Zacharid^  vom  Staate,  VII,  43.) 

'  This  is  the  practice  in  Taway.  Ritter,  Erdkunde,  V,  130.  And  so  in 
ancient  Germany,  y.  Grimm,  Rechtsalterthiimer,  92.  Right  of  the  "dead 
fire"  in  Spain  and  Portugal  during  the  middle  ages.  S .  Rosa  de  Viterbo : 
Elucidario  das  Palavras  etc.,  I,  470.  In  many  parts  of  Persia,  the  land  be- 
longs to  anyone  who  has  provided  it  with  water  by  canals  or  wells.  (Fniscr, 
Journey  in  Chorasan,  ch.  7.)  Especially  after  the  Mongolian  devastation 
about  the  beginning  of  the  fourteenth  century,  it  was  decreed  that  land 


Sec.  LXXXVIII.J  LANDED  PROPERTY.  265 

possession  of  forests  and  pasture  lands  asserted  itself  miieh 
longer  than  that  of  arable  land,  because,  in  the  case  of  the 
former,  labor  and  capital  play  a  much  less  important  part  in 
the  management  of  them.  And  yet,  even  in  the  case  of  arable 
land  etc.,  and,  in  the  highest  stages  of  civilization,  the  property- 
quality  is  yet  less  developed  than  the  property-quality  of 
capital.  How  seldom  do  vv^e  find  jidei  commissa  of  capital, 
or  capital  juridically  tied  up.  We  find  that  the  law  of  all 
ancient  nations  drew  a  marked  distinction  between  moveable 
and  immoveable  property,  and  that  the  power  of  disposing  of 
the  former  by  sale,  pledge,  in  dowry,  partition  etc.,  was  a  much 
freer  one.  And  even  now,  the  police  power  which  may  be 
exercised  over  moveable  property  is  much  more  restricted 
than  that  over  houses  and  land.^  The  justice  of  the  exclusive 
right  of  possession  to  what  one  has  earned  and  saved  is  obvi- 
ous to  every  one.  On  the  other  hand,  the  appropriation  of 
"  original  and  indestructible  natural  forces"  has  its  basis  not 
so  much  in  justice  as  in  the  general  good;  and  the  state  has 
always  considered  itself  entitled  to  attach  to  the  "  monopoly 
of  land,"  which  it  accorded  to  the  first  possessor,  all  kinds  of 
limitations  and  conditions  in  the  interest  of  the  common  good, 

Avhich  had  remained  uncultivated  for  a  long  time  should  belong  to  the  per- 
son who  made  it  productive.  (d^Ohsson,  Hist,  des  Mongols,  IV,  418.)  Simi- 
larly, in  the  time  of  the  ancient  Persians  (Polyb.,  X,  28,  3),  the  harvest  for 
the  first  five  years  belonged  to  the  person  who  first  irrigated  the  land.  On 
the  upper  Euphrates,  likewise,  the  land  is  very  often  neither  sold  nor  leased. 
Anyone  who  will  till  it  and  pay  one-tenth  of  the  produce  to  the  bey  may 
have  it  for  nothing.  (Rittcr,  X,  669;  compare  VIII, •468;  IX,  900.)  So,  too, 
among  the  Fulah  and  Mandingo  negroes,  and  even  among  the  Tschcrkessans. 
(Klemm,  Kulturgeschichte,  III,  337  fl:'.)  As  the  latest  stages  of  development 
so  often  present  instances  of  a  reversion  to  the  earliest,  we  find  that  Theo- 
dosius  and  Valentinian  decreed  that  the  agri  deserti  should,  after  two  years' 
cultivation,  belong  to  the  possesser.     L.  8,  Cod.  Just.,  XI,  58. 

2  Thus  anyone  may  burn  his  own  coat  or  throw  it  in  the  water ;  but  no 
one  may  set  fire  to  his  own  house  or  drown  his  land  \iy  the  destruction  of  a 
dam.  Even  the  non-user  of  a  large  area,  in  a  thickly  populated  region, 
would  scarcely  be  permitted.  The  taking  of  property  by  the  state,  at  the 
present  Hay  in  times  of  peace,  is  confined  almost  exclusively  to  land. 


266  PRODUCTION  OF  GOODS.  [B.  I,  Ch.  V. 

and  sometimes  to  consider  private  property  in  land  in  the  light 
of  a  semi-public  function.^  I  may  instance  the  feudal  princi- 
ples of  the  latter  portion  of  the  middle  ages,  which  are  so  far 
removed  from  our  ideas  of  private  property  in  land;  and  yet, 
of  which  many  echoes  are  heard,  even  in  our  day,  and  are  not 
without  their  influence  in  practice.  Thus,  further,  for  instance, 
even  in  England,  the  greater  number  of  the  poor-rates,  of 
taxes  for  the  support  of  the  established  church,  the  main- 
tenance of  public  highways  etc.,  are  heaped  upon  the  rent  of 
land.  Many  socialists  have  proposed  to  make  the  state  the 
sole  proprietor  of  the  soil,*  sometimes  adding  the  condition, 
that  the  previous  private  owners  should  be  compensated  in 
capital,  when  it  would  be  at  least  supposable  that  private  cap- 
ital might  be  enticed  to  cultivate  it,  if  long  and  sure  leases  of 
it  were  made.  This  would  be  a  "  good  "  demesne-husbandry, 
extending  over  the  entire  country.  We  need  only  glance  at 
those  kingdoms  in  which  something  analogous  is  to  be  found, 

^  Thus  P.  V.  Arnim,  in  a  work  entitled  "  Ideen  zu  einer  voUstandigen  land- 
wirthschaftlichen  Buchfiihrung,  1S05,  a  treatise  on  "agricultural  book-keep- 
ing," considers  the  farmer  as  a  state  official  who  should  cultivate  whatever 
he  believed  in  conscience,  or  what  the  state  declared  to  be,  most  necessary. 
He  suggests  that  the  state  should  subject  all  new  purchasers  of  land  to  an 
examination  to  ascertain  whether  they  are  rich  and  noble  enough  to  act  in 
this  way. 

*Thus,  for  instance,  Herbert  Spencer,  Social  Statics,  1S51,  114  ft",  and  to 
some  extent  Spinoza,  Tract,  polit.,  VI,  2.  There  are  now  in  England  several 
Land-Tenure-Reform-Associations,  some  of  which  would  "  expropriate  "  all 
land  and  vest  the  title  in  the  state.  The  programme  of  the  others  embraces 
not  only  opposition  to  the  right  of  primogeniture,  to  family  fidei  commissa 
and  the  assertion  of  the  right  of  freedom  of  trade  in  land,  and  of  a  more 
democratic  use  of  common  lands,  but  also  the  appropriation  by  the  state  of 
the  increase  in  the  rent  of  land  which  is  caused  by  no  labor  of  the  landlord, 
but  solely  by  the  increase  of  population  and  of  the  wealth  of  the  community 
or  of  the  nation.  Ne-wmarch,  on  the  other  hand,  very  correctly  remarks,  that 
since  it  is  impossible  to  draw  a  line  of  demarkation  showing  the  increase  of 
the  value  of  land  growing  out  of  the  increase  of  population  etc.,  the  owner 
of  land  in  making  improvements  would  never  know  whether  he  made  them 
for  himself  or  for  the  state.  (Statist.  Journal,  1S71,  488  ff.)  Compare 
Wolkojf,  Sur  la  Rente  fonci^re,  1854,  and  H.  H.  Gossen,  Entwickelung  der 
Gesetze  des  menschlichen  Verkehrs  (1854). 


Sec.  LXXXVIIL]  LANDED  PROPERTY.  0(]7 

especially  the  despotisms  of  the  east,^  to  divine  that  such  a 
system  does  not  suffice  to  insure  the  real  productiveness  of  a 
nation's  economy.'' 

*  In  Congo  and  on  the  gold  coast  of  Guinea  the  land,  in  whole  villages, 
is  tilled  in  common  and  the  harvest  distributed  among  the  families  per  capita. 
Wherever  absolutism  reigns,  the  prince  is  also  the  owner  of  all  the  land. 
(Klanin.  Ill,  337.)  In  China,  where  the  original  tenure  in  common  of  the 
land  by  all  was  broken  through  in  the  third  century  before  Christ,  all  the 
land  of  the  country  now  belongs,  strictly  speaking,  to  the  state ;  and  the  pos- 
sessor of  land  who  permits  it  to  go  untilled  is  jiunished.  (Plath,  in  the 
phil.-hist.  Sitzungsberichten  der  Miinchener  Akad.,  1S73,  793  ft")  In  Corea, 
private  property  in  land  is  unknown ;  arable  land  is  divided  by  the  state  ac- 
cording to  the  number  in  a  family.  (Ritter,  IV,  633.)  The  example,  on  the 
largest  scale,  of  a  country  without  private  property  in  land  is  the  British 
East  Indies.  Compare  the  paper  by  Ch.  Campbell^  in  the  Essays  published 
by  the  Cobden  Club;  System  of  Land  Tenure  in  various  Countries,  1870. 

^The  legal  and  economic  difference  between  property  in  land  and  property 
in  capital  is  well  defined  by  J.  S.  Mill,  Principles,  II,  ch.  2, 6.  "  The  reasons 
which  form  the  justification,  in  an  economical  ])oint  of  view,  of  property  in 
land,  are  only  valid  in  so  far  as  the  proprietor  of  the  land  is  its  improver. 
In  no  sound  theory  of  private  property  was  it  ever  contemplated  that  the 
proprietor  of  land  should  be  merely  a  sinecurist  quartered  on  it."  He  here 
alludes  specially  to  Ireland.  The  Fourierist,  Considcrant,  distinguishes  ac- 
curately between  the  capital  produced  by  labor  and  saving,  and  the  increase 
of  the  value  of  land  caused  by  capital  and  labor,  and  its  original  value. 
Only  the  first  two  elements  can  justly  be  made  property.  But  as,  for  pru- 
dential reasons,  it  is  necessary  to  grant  individuals  the  right  of  private  prop- 
erty in  land,  those  who  are  not  such  proprietors  must,  as  a  compensation  for 
the  common  property  which  they  have  lost,  be  guarantied  the  right  to  labor. 
(Theorie  du  Droit  de  Propriete  et  du  Droit  au  Travail.)  In  England,  the 
opinion  that  the  compulsory  supjiort  of  the  poor  was  inti'oduced  in  compen- 
sation to  them  for  the  establishment  of  private  property  in  land  has  met 
with  considerable  favor.  Bishop  Woodxvard,  On  the  Expediency  of  a  Regu- 
lar Plan  for  the  Maintenance  of  the  Poor  in  Ireland,  1775.  Compare  Eden, 
State  of  the  Poor,  I,  413.  However,  the  poor  rates,  in  a  country  like  Eng- 
land, are  much  more  than  an  equivalent  of  what  its  soil  could  produce  with- 
out the  assistance  of  capital. 


268  PRODUCTION  OF  GOODS.  [B.  I,  Cn.  VI. 


CHAPTER  VI. 

CREDIT. 


SECTION  LXXXIX. 

CREDIT  IN  GENERAL. 

Credit^  is  the  power  of  disposition  over  the  goods  of  an- 
otlier,'^  voluntarily  granted  in  consideration  of  the  mere  prom- 
ise of  the  counter-value.^  As  Franklin  says :  A  good  pay 
is  master  of  another  man's  purse.  Hence,  it  is  evident  that 
whoever  would  obtain  credit  must  be  believed  to  possess  the 
ability  as  well  as  the  intention  to  fulfill  his  promise.     Where 

'  The  principal  classical  work  on  this  subject  is  Nebenius,  Der  oftentliche 
Credit,  1S20,  2d  ed.,  1S29.  Previousl}',  Salmasius,  De  Mode  Usurarum,  1639; 
and  even  Demosthenes^  adv.  Dionysiod,  12S3.  Compare  further  Schdffle^  in 
the  Deutsch.  Vierteljahrsschrift,  No.  106,  II,  2S9  ft'. 

'  Compulsarjr  loans  by  the  state,  for  instance,  occupy  an  intermediate  posi- 
tion between  taxes  and  credit-operations,  properly  so  called. 

3  Besides  loans  proper,  all  payments  in  advance,  or  delays  made  in  the  pay- 
ments of  earnest-money,  all  leases  and  lettings,  which  Courcelle-Seneiiil  calls 
nn  mediocre  degrd  de  crddit,  insurances  and  even  all  contracts  foi'  wages 
Avhere  the  payment  is  delayed  for  a  long  period  of  time,  are  species  of  credit. 
For  a  nice  distinction  between  leasing  (Pacht)  and  letting  (MtetJie),  see 
Knies,  Tubinger  Ztschr.,  i860,  180  ft".,  and  the  Freiburger  Univ.  Programm., 
9.  September,  1S62.  D.  Wakefield^  Essay  upon  Political  Economy,  1804,  35, 
distinguishes  between  "loan-credit"  which  is  given  to  a  poor  man  in  the 
hope  of  his  paying  it  by  means  of  his  labor,  and  "  exchange-credit,"  or  credit 
between  property  owners.  CieszkoTvski's  definition :  le  cridit  c'est  la  metamor- 
fkose  des  capitaux  stables  et  engagis  en  capitaux  circulants  et  d6gagis.  (Du 
Credit  et  de  la  Circulation,  2d  ed.,  1847.)  According  to  Knies^  Tubinger 
Ztschr.,  1859,  568,  every  credit-operation  is  an  exchange  or  sale  of  services, 
one  of  which  is  to  be  performed  in  the  present,  and  the  counter-service  of 
the  other  party  in  the  future.    According  to  Macleod,  it  is  "  a  sale  of  debts." 


Sec.  LXXXIX.]  CREDIT  IN  GENERAL.  269 

this  belief  is  based  simply  on  the  opinion  entertained  of  the 
person  of  the  debtor,  we  speak  of  personal  credit/  in  contra- 
distinction especially  to  the  credit  based  on  bailment,  pledge, 
hypothecation  etc.     The  longer  the  time  between  the  making 
of  the  promise  and  the  period  fixed  for  its  fulfillment,  the  less 
certain  is  the  latter,  where  the  security  is  simply  the  person 
of  the  debtor.     It  is  chiefly  in  very  uncivilized  nations  and 
also  in  nations  in  their  decrepitude,  and  during  periods  of  an- 
archy, and  in  despotisms,  that  personal  security  stands  higher 
than  any  other.     The  same  is  true,  though  for  other  reasons, 
in  very  energetic  civilized  nations,  where  the  people  put  a  high 
estimate  on  the  element  of  labor  in  their  econom}^,  among 
whose  members  legal  security  is,  indeed,  found,  but  where  the 
peculiar  sensitiveness  of  speculation  would  be  too  much  ham- 
pered by  the  more  sluggish  nature  of  other  credits;  as,  for 
instance,  in  North  America,  and  even  in  ancient  Rome.     Civ- 
ilized nations  that  have  reached  the  stationary  economic  state, 
on  this  account  much  prefer  the  greater  security  and  the  ab- 
sence of  care  which  accompany  non-personal  credit.^     In  esti- 
mating the  ability  of  the  debtor  to  meet  his  promise,  we  must 
take  into  account,  especially,  the  disposable  character  of  his 
resources;   otherwise  it  would  be  impossible  to  understand 

■*  Personal  credit,  of  course,  preponderates  in  commerce.  Hence  it  is,  that 
in  mercantile  life,  information  concerning  the  personal  status,  reputation  etc. 
of  his  colleagues,  plays  so  important  a  part  with  the  merchant.  This  infor- 
mation was  made  more  accessible  in  England  by  the  Lloyd  institution.  On 
similar  North  American  institutions,  see  Tellkamfj^  Beitrage,  I,  51.  Credit 
given  on  security  is  a  modification,  sometimes  of  personal  and  sometimes  of 
real  credit.     Compare,  infra^  the  theory  on  bankers,  brokers  etc. 

^  In  despotisms,  credit  is  almost  entirely  personal.  Montesquieu  Esprit  des 
Lois,  L.  v.,  15.  In  New  York,  says  M.  Chevalier,  a  merchant  with  resources 
worth  200,000  francs,  can  do  a  business  of  from  1,000,000  to  1,500,000  francs. 
In  Paris,  under  similar  circumstances,  the  same  man  would  find  it  difficult  to 
be  credited  to  the  extent  of  500,000  francs.  In  Holland,  two  hundred  years 
ago,  a  person  who  hypothecated  his  property  was  obliged  to  pay  a  higher 
rate  of  interest  than  in  business  (Becher,  Polit.  Discurs,  1763,  699),  while  the 
stationary  period,  one  hundred  years  ago,  made  personal  credit  extremely 
difficult.  In  Zurich,  it  was  encouraged  by  the  prohibition  of  loaning  money 
out  of  the  country.    (BiiscJi,  GedUnnlauf,  III,  40.) 


270  PRODUCTION  OF  GOODS.  [B.  I,  Ch.  VI. 

why  the  merchant  may  so  frequently  obtain  a  loan  on  his 
stock  equal  to  its  whole  value,  while  the  owner  of  land  can 
place  it  as  security  only  to  the  extent  of  half  its  value. 

Credit,  on  the  whole,  grows  in  importance  with  an  advance 
in  civilization,  and  this  is  true  especially  of  credit  intended  for 
productive  purposes.  This  is  a  consequence  of  the  greater 
division  of  labor  which  causes  unfinished  products  to  be  put  on 
the  market  more  and  more  frequently, —  products  which  come 
to  have  a  value  only  after  some  time,  but  which,  when  that  time 
has  elapsed,  have  present  value.  And,  indeed,  as  the  world 
advances  and  civilization  grows,  it  becomes  much  easier  to 
forecast  the  future  with  certainty.  The  future,  also,  then  be- 
comes more  a  source  of  solicitude,  and  fixed  capital,  as  a  con- 
sequence, plays  a  part  which  grows  daily  more  important. 
The  limit  to  the  development  of  credit  is  this :  it  is  safe  only 
when  the  debtor  invests  his  borrowed  goods  in  the  production 
of,  to  say  the  least,  their  equivalent.  This  is  why  the  person- 
ality of  the  state,  clothed  with  immortality  and  with  a  formally 
boundless  power  of  taxation,  is  so  often  seduced  into  engag- 
ing in  transactions  of  credit  which  are  never  self-discharged." 
The  social  diseases  of  panics  and  of  extravagant  enterprises 
stand  in  the  same  relation  to  credit  that  unbelief  and  super- 
stition do  to  true  religion.''^     (ScJmffle.) 

SECTION  XC. 

CREDIT— EFFECTS  OF  CREDIT. 

As  regards  the  effects  of  credit,  we  may  remark,  that  it  is  as 
powerless  directly  to  produce  new  capital  as  is  the  division 
of  labor  to  produce  new  workmen.     To  every  credit  of  the 

^Sdidffle,  Nat.  CEk.,  II,  Aufl.,  112. 

"^  Sclidffle,  according  to  the  purpose  which  it  is  intended  to  subserve,  divides 
credit  into  production-credit  (investment  of  loans  in  immoveable  property 
and  in  moveable  property  engaged  in  industrial  operations),  consumption- 
credit  and  clearing-credit,  or  loans  made  to  pay  respited  purchase  and  earnest 
money,  inheritances  etc.     (Kapitalismus  und  Socialismus,  552.) 


Sec.  XC]  CREDIT.  271 

creditor  corresponds  a  debit  of  the  debtor.     As  Turgot  said: 
Tout  credit  est  un  cmprunt}  ~  "^     But,  on  the  other  hand,  credit 

^  Pinto,  Traite  de  la  Circulation  ct  du  Credit,  1771,  considers  loans  bearing 
interest  as  new  portions  of  the  resources  of  a  country  (p.  161),  and  that  gov- 
ernment loans  not  made  in  excess  of  its  powers  are  urte  alchyniie  rdalisde  dont 
souvent  eux  tncines  qui  V  ofbrejit  w'  ciitciident  ^as  tout  le  mystire,  (p.  338.)  Sim- 
ilarly and  earlier,  v.  Schroder,  F.  Schatz-und  Rentkammer,  238  ff ;  Mdlon, 
Essai  politique  sur  le  Commerce,  1734,  ch.  6;  next,  Hamilton,  Report  to  the 
House  of  Representatives  on  the  subject  of  Manufactures,  I?cc.  5,  1791; 
Von  Strucnsce,  Abhandlungen,  iSoo,  I,  259.  See  infra,  §  210.  More  re- 
cently, St.  Ckamans,  Nouvel  Essai  sur  la  Richesses  des  Nations,  1824,  S3  ft". 
To  some  extent,  even  Dietzel,  System  der  Staatsanleihen,  1S55,  200.  This  is 
a  dangerous  error,  since  to  every  credit  there  is  a  set-off  in  the  nature  of  a 
debit  of  an  equal  amount;  and  the  evidences  of  debt  are  nothing  but  claims 
on  the  future  revenue  of  the  state.  This  was  fully  recognized  by  Cantillon, 
291  ff.  One  of  the  principal  advocates  of  that  view  among  writers  on  Polit- 
ical Economy  is  the  vivacious,  acute  and  practically  not  unskillful,  but 
sophistically  superficial  Madeod.  (Elements  of  Political  Economy,  1858,  ch. 
3,  Dictionary,  1862,  v.  Credit.)  The  creditor's  assignable  right  of  demand,  he 
considers  immaterial  capital.  While  bills  of  lading,  warehouse  receipts,  dock 
yard  receipts  etc.,  only  represent  goods,  the  bank  note  is  new  goods.  Even 
metallic  money  has  only  a  credit-value,  inasmuch  as  it  can  be  used  only  to 
effect  exchanges.  To  the  —  of  the  creditor  may  correspond  a  -f  of  the 
debtor;  but  the  latter  is  negative  only  in  the  sense  that  we  speak  of  negative 
electricity,  a  negative  thermometrical  degree.  When  an  estate  is  leased,  the 
owner  has,  in  his  demand  for  rent,  a  vendible  flus;  but  the  lessee  no  corre- 
sponding minus.  (Not  so.  To  the  same  extent  that  the  proprietor  has  his 
future  payments  on  the  lease  discounted,  the  present  sale-value  of  his  estate 
is  diminished ;  or  if  it  is  not  sold,  the  last  party  obtaining  the  discount  has 
made  his  available  capital  as  much  less  by  the  advance  as  that  of  the  lessor 
has  been  increased.)  The  "  discounting  of  the  future,"  that  is,  the  apparent 
capitalization  of  hopes,  so  much  in  vogue  at  the  present  time,  may  be  a  great 
spur  to  production  as  it  may  also  be  to  baseless  extravagance. 

-  Many  theoreticians  ascribe  a  direct  creation  of  new  capital  to  credit,  in  so 
fur  as  the  capacity  of  the  evidences  of  debt  to  circulate  as  a  medium  of  ex- 
change effects  a  real  saving,  and  permits  the  former  very  costly  and  intrin- 
sically valuable  instruments  of  exchange  to  be  used  in  some  other  way. 
(§  123.)  Compare  Ricardo,  Proposals  for  a  secure  and  economical  Cur- 
rency (1817).  y.  S.  Mill,  Principles,  II,  174  and  36.  McCuHocJi,  Commercial 
Dictionary,  art.  Credit.  And  so  it  was  in  the  first  four  editions  of  this  book 
of  mine.  But  here,  too,  there  is,  immediately,  only  a  transfer  of  already  ex- 
isting capital.  The  person,  for  instance,  who  accepts  a  bank  note  for  pay- 
ment, loans  a  part  of  his  capital  to  the  bank ;  and  the  advantage  to  the  whole 


272  PRODUCTION  OF  GOODS.  [C.  I,  Ch.  VI. 

facilitates  the  transmission  of  the  elements  of  production, 
especially  of  capital,  from  one  hand  to  another.*  When, 
therefore,  the  debtor  employs  the  capital  thai  he  has  borrowed, 
more  productively  than  the  creditor  would  have  done,  the  whole 
country  is  a  gainer;  as  it  is  a  loser,  on  the  contrary,  when  a 
person  engaged  in  industry  advances  to  the  idler,  the  frugal 
rnan  to  the  spendthrift,  the  solid  man  to  the  wild  speculator. 
In  declining  nations,  where  every  new  development  hastens 
decay,  the  Matter  alternative  may  be  the  prevailing  one ;  and, 
especially  here,  may  the  usurious  giving  of  credit  by  the  shrewd 
to  the  simple  lead  to  ruinous  debtor-slavery.  Among  a  vig- 
orous and  energetic  people,  thp  former  is  apt  to  govern,  as  it 
is  only  by  the  productive  employment  of  the  loans  made  that 
they  are  permanently  enabled  to  pay  interest.  Here  credit  is 
an  invaluable  means,  not  only  of  putting  idle  capital  in  motion, 
and  of  making  active  capital  still  more  active,  but  especially  of 
concentrating  capital,  by  which  it  may  gain  as  much  in  produc- 
tive power  as  labor  does  by  the  cooperation  of  labor.  This  is 
effected,  very  frequently,  by  means  of  joint-stock  companies, 
the  principle  of  which  recommends  them  especially  in  en- 
terprises where  stationary  capital  is  required  rather  than  cir- 
culating capital,  and  where  capital  generally  plays  a  greater 
part  than  labor;  and  where  this  labor  can  be  subjected  to  pro- 
visions which  may  be  accurately  laid  down  beforehand;  as, 
for  instance,  in  the  case  of  docks,  insurance  companies,  banks,^ 

community  of  such  credit-operations  consists  chiefly  in  this :  that  so  large 
a  quantity  of  cash-capital  which  lay  idle  in  banks  etc.,  may  be  used  more 
productively. 

2  When  Roesler  says  that  credit  is  capital,  the  product  of  saving,  and  very 
serviceable  in  further  production  (Grittids.^  300)^  he  confounds  credit  itself 
with  the  foundations  of  credit,  which  are,  indeed,  in  large  part  material  or 
moral  capital. 

■*  Compare  Discourse  on  Trade,  Coyn  and  Paper-Credit,  London,  1697, 
72  ff. 

^Compare  Buron,  Guerre  au  Credit,  1S68.  Schdffle,  Tiib.  Ztsch.,  1S69, 
296  fF.  With  a  thorough  understanding  of  its  politico-economical  hearing, 
O.  Michaelts,  (Berliner  V.  Jahrsschr.  1S63,  IV,  121,)  says:  The  capital-value  of 
my  credit  is  not  equal  to  the  nominal  value  of  my  evidences  of  indebtednes? 


Sec.  XC]  CREDIT.  070, 

etc.  Banks,  then,  become  real  reservoirs  of  capital,  provided 
they  are  properly  and  judiciously  established  and  managed; 
real  reservoirs  which  receive  in  one  place  the  capital  which  is 
superfluous  elsewhere,  in  order  to  supply  some  other  place 
with  that  which  is  necessary  to  it.  The  more  conlidence  in- 
creases, the  more  are  even  the  smallest  driblets  of  capital 
awakened  from  their  slumbers,  and  made  active  and  produc- 
tive. It  is  only  by  means  of  credit  that  the  help  of  foreign 
capital  can  be  obtained  for  home  production.  Indeed,  credit, 
considered  as  an  exchange  of  probable  future  goods  against 
actually  existing  goods,  is  one  of  the  principal  functions  of 
the  temporal  solidarity  of  the  economy  of  nations.  (Schdffie.) 
"Without  credit,  there  would  be  very  little  place  for  specula- 
tion proper. 

We  may  see  how  the  possibility  of  giving  and  receiving  cred- 
it promotes  wealth,by  contemplating  the  poorer  classes,  whose 
poverty,  both  as  cause  and  effect,  is  very  closely  related  to  the 
absence  of  credit.  And  here  we  have  a  suggestion  of  the  re- 
verse to  the  bright  side  of  the  picture  of  credit,  analogous  to 
that  mentioned  in  §  62  of  the  cooperation  of  labor,  viz.:  that 
it  tends  to  intensify  inequality  among  men.  The  man  who 
is  distinguished  by  the  amount  of  his  wealth,  or  by  his  po- 
sition is  naturally  known  to  a  much  wider  circle  than  others 
are.  From  which  it  follows,  that  he  may,  by  the  way  of  cred- 
it, increase  his  power,  already  so  much  greater  in  the  econom- 
ic world,  by  a  much  larger  multiplier.^     Hence,  it  need  not 

[notes  etc.],  but  to  the  capitalized  amount  of  the  extra  surplus  which  I  have 
obtained  in  my  business  by  means  of  credit,  after  deduction  is  made  of  the 
costs  and  of  the  risk-premium. 

6  We  shall,  in  the  books  to  follow  this,  inquire  with  great  care,  what  are 
the  means  best  calculated  to  remedy  this  dangerous  tendency.  We  need 
only  remark  here,  that  it  is  to  be  found  in  a  judicious  association  of  small 
capitalists,  and  also  in  the  capitalization,  so  to  speak,  of  personal  qualities.  A 
well  organized  society  of  work-men,  without  capital,  may  indeed  obtam 
credit,  as  for  instance,  the  Schultze-Delitsch  societies,  the  Russian  artel- 
schnicks  (market-aid  societies)  etc.  prove.  (Friikanf,  Die  russ.  Artels  in 
Faucher^s  Vierteljahrsschrift,  1S68,  I,  106  fl'.)  We  may  also  mention  the 
greater  credit  accorded  to  a  land-owner  the  moment  he  becomes  a  member 
Vol.  I.— 18 


274  PRODUCTION  OF  GOODS.  [B.  I,  Ch.  VI. 

surprise  us,  that  the  great  obtain  credit  from  those  in  a  lower 
position,  at  least  as  frequently  as  they  give  them  credit  in  turn. 
On  the  side  of  the  creditor,  the  possibility  of  making  loans 
is  a  powerful  incentive  to  frugality.  Were  there  no  credit, 
those  who  were  not  in  a  condition  to  employ  their  capital  pro- 
ductively would  make  savings  only  within  veiy  narrow 
limits.'' 

SECTION  XCI. 

DEBTOR  LAWS. 

Private  credit  is  always  conditioned,  and  in  a  great  many 
ways,  by  the  situation  of  the  whole  nation's  business ;  in  other 

of  a  land-loan  association  as  compared  with  what  he  could  obtain  before  he 
had  joined  it.  The  popular  belief  of  the  ancient  Egyptians  afforded  them  a 
very  great  instrument  of  credit  in  the  pledging  of  the  remains  of  their  an- 
cestors.    (Herodot.,  II,  136.) 

'  B.  Hildehrand  is  of  opinion  that  the  Political  Economy  of  the  future  may 
be  characterized  as  credit-economy,  in  the  same  way  as  the  EcoruDmy  of  the 
present  may  be  called  money-economy,  and  that  of  the  past  as  barter- 
economy  of  barter.  (National  CEkonomie  der  Gegenwart  und  Zukunft,  I, 
276  ff.)  Hildehrand^ s  view  is  correct  in  so  far  as  that,  with  every  advance  in 
civilization,  credit  comes  to  have  absolutely  and  relatively  an  ever  increasing 
importance,  although  in  the  middle  ages,  especially  under  feudal  forms 
( Lchensformcn),  there  Avere  numberless  operations  in  credit.  Otherwise, 
however,  Hildehrand' s  three  kinds  of  economy  are,  by  no  means,  coordinated. 
While  barter  and  purchase  through  the  instrumentality  of  money,  in  every 
instance,  entirely  exclude  each  other,  it  is  impossible  to  imagine  a  credit- 
transaction  of  which  the  promise  of  a  barter-performance  or  of  a  money -per- 
formance does  not  constitute  the  base.  During  a  "money-economical 
(geldwirtJisckaftlicIien)  period  "  [i.  e.,  one  during  which  money  is  the  medium 
of  exchange,  and  not  notes;  and  when  barter  does  not  obtain. —  Translator.'] 
the  service  rendered  by  money  as  a  medium  of  exchange  may,  for  the  most 
part,  be  supplanted  by  credit.  Money,  as  a  measure  of  value,  still  remains 
the  substratum  of  credit  itself.  (See  Knies  in  the  Tiibinger  Ztschr.,  1S60, 
154  ff. ;  and  in  the  Freiburger  Programm^  9  Sept.,  1862,  19.)  Earlier  yet,  A. 
JFag-ner,  Beitr.  zur  Lehre  von  den  Banken,  1857  ff.  Among  the  most  prac- 
tical propositions  of  Saint  Simonism  is  that  oi  a.  systhnc  general  des  haftques, 
intended  to  administer  all  the  goods  of  the  nation,  and  to  loan  them  to  indi- 
viduals engaged  in  production.     (Bazard,  205  ff.) 


Sec.  XCI.]  DEBTOR -LAW.  275 

words,  by  their  politico-economical  situation.  It  is  especially 
in  the  higher  stages  of  civilization,  that  one  bankrupt  may 
easily  drag  numberless  others  down  with  him  ;•  and  where  the 
laws  are  bad  or  powerless,  not  even  the  wealthiest  man  can 
predicate  his  own  solvency  for  any  length  of  time  in  advance. 
One  of  the  most  important  conditions  of  credit  is  the  certainty 
that,  if  the  debtor's  good  will  to  meet  his  obligations  should 
fail,  it  shall  be  supplied  by  the  compulsory  process  of  the 
courts.  Hence,  the  importance  of  a  judicial  procedure,  at 
once  impartial,  enlightened,  prompt  and  cheap.^  The  more 
vigorous  the  laws  relating  to  debt  are  in  preventing  dishonesty 
on  the  part  of  the  debtor,  the  more  advantageous  are  they  to 
honorable  and  honest  debtors.  Adam  Smith  has  rightly  said, 
that  in  countries  in  which  creditors  are  not  completely  pro- 
tected by  the  courts,  the  honorable  man  who  borrows  money 
is  in  the  same  condition  as  the  notoriously  dishonest  man  or  the 
spendthrift,  in  better  governed  countries.  He  finds  it  more 
difficult  to  borrow  and  is  obliged  to  pay  a  higher  rate  of  in- 
terest.^    Rigorous  debtor  laws,  on  the  other  hand,  diminish  in 

'  It  is  destructive  of  credit  to  allow  the  ddator  to  await  several  decrees  or 
judgments  before  his  liability  is  established;  to  allow  him,  on  easy  terms, 
dekiys,  reversals  of  judgment,  the  costs  of  the  case  etc.  The  term  within 
which  a  creditor  might  bring  in  his  claim  before  the  meeting  of  creditors  in 
the  Amsterdam  Boedel-chamber  was  formerly  thirty-three  and  a  third  years. 
(BUsck,  Darst.  der  Handlung,  Zusatz,  82.)  In  the  presidency  of  Bengal 
there  were,  in  1S19,  Si,ooo  cases  in  arrears,  and  in  1829,  140,000.  Westinin- 
ister  Review,  XIX,  142. 

^  And  yet  Melon  is  of  opinion  that  the  state  should  favor  the  debtor  as 
much  as  possible.  (Essai  politique  sur  le  Commerce,  ch.  12,  iS.)  This  was 
the  view  entertained  on  this  subject  by  the  older  practitioners.  In  Bengal, 
the  dJiura,  a  species  of  "judgment  of  God,"  in  which  the  party  who  could 
hold  out  longest  against  hunger  was  declared  the  victor,  was  the  only  means 
to  compel  a  debtor  to  pay  his  debt.  As  a  consequence,  the  Bengal  peasant 
could  not  borrow  money  at  less  than  60  per  cent,  per  annum.  Edinburgh 
Review,  XXII,  67.  On  the  damages  attending  the  credit-laws  and  credit- 
courts  of  Russia,  by  which  all  foreign  goods  are  rendered  exceedinglv  dear, 
see_  V.  Sternberg,  Bemerkungen  iiber  R.,  loo  ff.  In  a  country  in  Avhich  a 
great  many  powerful  personages  are  above  the  laws,  an  incorporated  loaning 
bank  may  be  an  indispensable  necessity.    (StorcJi,  Handbuch,  II,  p,  23  ff.) 


276  PRODUCTION  OF  GOODS.  [B.  I,  Cn.  VI. 

the  whole  nation  the  amount  of  "  bad  debts,"  that  is,  a  not  in- 
significant portion  of  the  cost  of  production.  They,  at  the 
same  time,  promote,  as  far  as  it  is  in  the  power  of  laws  to  do 
it,  national  honor  and  the  mutual  confidence  of  man  in  man. 
The  excellence  of  their  debtor  laws,  in  their  most  flourishing 
period,  was  one  of  the  principal  elements  which  contributed  to 
make  Athens  and  Rome  of  such  importance  in  the  history  of 
the  world.^ 

SECTION  XCII. 

HISTORY  OF  CREDIT  LAWS. 

In  the  history  of  laws  relating  to  credit,  we  may  distinguish, 
in  a  great  many  countries,  three  stages  of  development. 

A.  The  laws,  in  the  first  stage,  are  very  severe.  In  the 
Germanic  middle  age  the  insolvent  was  disgraced.  He  be- 
came the  slave  of  his  creditor  (zti  Hand  und  Halfter),  who 
might  imprison  him,  fetter  him  (stocken  und  blocken),  and 
probably  kill  him.  A  Norwegian  law  allowed  the  creditor, 
when  his  debtor  would  not  work  and  his  friends  would  not 
ransom  him, to  take  him  before  the  court,  and  "to lop  olTfrom 
his  body  what  part  he  will,  above  or  below."  ^     To  judge  of 

In  Naples,  even  as  recently  as  1804,  no  debtor  could  be  arrested  during  the 
last  six  months  of  the  queen's  pregnancy.  At  a  previous  period,  one  might 
fail  in  business  there  and  escape  all  punishment  by  exposing  the  hindermost 
part  of  himself  in  a  nude  state  publicly  before  a  column  of  the  Vicaria. 
(Rehfues,  Gemalde  von  Neapel,  I,  p.  203  seq.,  222.)  In  Schwytz,  the  rate  ot 
interest  is  so  high,  because  the  law  allows  the  debtor  to  pay  his  creditor, 
whether  the  latter  will  or  not,  in  articles  of  household  furniture,  clothes  etc., 
estimated  at  a  very  high  value.  (Hermann^  Staatsw.  Untersuchungen,  202.) 
It  has  now  become  quite  usual  in  the  United  States,  on  account  of  the  many 
delays  granted  to  the  debtor  by  "  democratic  "  laws  introduced  there,  instead 
of  mere  mortgage,  to  give  full  warranty  deeds  when  capital  is  loaned.  By 
this  means,  the  creditor  is  in  danger,  when  misfortune  overtakes  him,  to  see 
himself  compelled  to  let  his  property  go  at  one-fourth  of  its  value. 

'  See  the  Heliast  oath  in  Detnosih'.,  adv.  Timocr.,  746.  The  Roman  sys- 
tem of  credits  in  the  time  of  Polybius  was  much  better  than  the  Cartha- 
genian.     Polyb.,  VI,  56,  XXXII,  13. 

'  Sachsenspiegel,  III,  39.     y.  Grimtn,  Deutsche  Rechtsalterthiimer,  612  fF. 


Sec.  XCIL]  HISTORY  OF  CREDIT  LAWS.  277 

these  provisions  correctly,  it  is  necessary  to  bear  in  mind  the 
many  ways  in  which  family  resources  were  at  this  time  bound 
and  tied  up ,  and  not  forget  "  the  power  of  defiance  in  these 
iron  natures."  "^     (JViehuhr.) 

B.  The  canon  law  introduced  milder  principles.  Gregory 
the  Great  had  already  prohibited  the  holding  on  to  the  body 
of  the  debtor.^  On  this  account,  during  the  latter  portion  of 
the  middle  ages,  it  was  customary  to  stipulate  by  contract  that 
the  provisions  of  the  ancient  law  should  govern  in  this  matter, 
to  submit  to  imprisonment  etc.*  The  influence  of  the  Roman 
law  made  it  gradually  more  usual,  in  the  case  of  insolvent 
debtors,  to  demand  no  more  from  them  than  the  assignment 
of  their  property  for  the  benefit  of  their  creditors.  This,  how- 
ever, led  to  numerous  frauds ;  and  these  became  more  frequent 
in  proportion  as  the  laws  governing  the  property  of  parties 
while  the  marriage  relation  existed  between  them,  and  as  ex- 
ecutions against  landed  property  etc.  were  defective. 

C.  Hence,  in  more  highly  civilized  times,  there  has  been  a 
return  to  the  severity  of  earlier  ages.  Persons  engaged  in 
commerce,  especially  those  whose  capital  is  so  volatile,  and  to 
whom  time  is  a  thing  so  precious,  can  scarcely  dispense  wil- 
lingly with  personal  imprisonment  for  debt.  Hence,  legisla- 
tion on  bills  of  exchange,  sanctioned  especially  by  imprison- 
ment of  the  person,  plays  a  very  important  part  in  the  com- 
mercial cities  of  the  seventeenth  century,  as  it  did,  naturally, 
much  earlier  in  Italy  and  the  Netherlands.^     Modern  laws  in 

Dahlinann^  Danische  Gesch.,  II,  245,  339.  Hermann^  Russ.  Gesch.,  Ill,  357. 
On  slavery  for  debt  among  the  Malays,  see  Ausland,  1845,  No.  157. 

^ Beauj'our,  Tableau  du  Commerc  en  Grfece,  II,  176. 

^C.  2  X.  De  Pignor.  An  appropriate  provision  in  a  priestly  govern- 
ment.   Diodor.,  I,  79. 

*  Staying  in  a  place  by  the  debtor  until  the  creditor  is  satisfied,  and  other 
degrading  stipulations,  which,  however,  were  prohibited  by  the  police  regu- 
lations of  the  Empire  in  1548,  art.  17. 

^  Mai'teii's  Ursprung  des  Wcchselrechts,  1797.  .Statuta  Mediol.,  14S0,  fol. 
238  ff.  The  municipal  law  of  Florence  unconditionally  imprisoned  the 
father  or  grandfather  for  the  debt  of  the  son,  when  the  latter  engaged  in  in- 
dustrial pursuits  with  their  consent.     (Stat.  Flor.,  I,  201)     In  Bologna,  the 


27S  PRODUCTION  OF  GOODS.  [B.  I,  Cii  VI, 

many  cases  punish  the  bankrupt  whenever  an  examination  of 
his  books,  kept  after  approved  methods,  does  not  demonstrate 
his  innocence.®  The  great  facility  of  fraudulent  bankruptcy, 
where  commerce  has  attained  a  high  degree  of  development 
and  complication ;  the  absence  of  honor  shown  in  engaging  in 
speculation  for  one's  own  gain  with  a  stranger's  capital,  and 
without  the  real  owner's  knowledge;  the  comparatively  small 
number  of  blameless  and  irreproachable  bankruptcies,''  cer- 
tainly justify  these  provisions.^  ^ 

bi-others  of  a  bankrupt  who  had  constituted  one  household  with  him  were 
held  responsible  for  his  debts.  (Statuti  dell'  Universita  de  Mercantati  della 
Citta  di  B.,  1550,  fol.  no.)  The  law  of  Geneva  excluded  from  all  positions  of 
honor  the  son  who  had  left  his  father's  debts  unpaid.  Montesquieu,  E.  des 
Lois,  XX,  16.  The  consequence  was,  that  among  the  higher  classes  not  a 
creditor  lost  anything  for  centuries.  (K.  L.  v.  Haller,  Restauration  der 
Staatswissenschaften,  VI,  519.)  Compare  the  "Nurenberger  Reformation" 
of  1479,  fol.  61  and  68  of  the  edition  of  1564. 

fi  Compare  the  R.  P.  O.  of  154S,  art.  22.  And  so,  by  the  Code  de  Com- 
merce, III,  4,  I,  even  the  simple  bankrupt  in  contradistinction  to  the  fraudu- 
lent bankrupt  is  punished,  and  every  person  unable  to  pay  his  debts  is  de- 
clared a  simj>le  bankrupt,  who,  among  other  things,  has  made  excessive 
household  expenses,  or  lost  considerable  sunas  by  play  etc.  Compare  Sully, 
Mdmoires,  Livre  XXVI,  who  declares  it  to  be  his  most  wholesome  law,  that 
fraudulent  bankrupts  should,  like  thieves,  be  punished  with  death,  and  that 
all  their  fraudulent  assignments,  gifts,  etc.,  should  be  declared  void.  Fur- 
ther, Ordonn.  de  Louis  XIV.,  sur  les  Failletes,  art.  11 ;  y.  de  Wit,  Mfimoires, 
77  if;  V.  den  Heuvel,  Sur  le  Commerce  de  la  Hollande,  iioff.  Frederick 
William  I.,  in  1715,  threatened  with  the  galleys  all  light-headed  bankrupts, 
and,  in  1723,  all  those  who,  knowing  their  insolvent  condition,  should  effect 
further  loans.  Mylius,  Corp.  Const.  March.  II,  2,  31,  40.  For  China,  see 
Davi?,  The  Chinese,  i,  247  ff.  Gr.  Sodcn,  Nat.  Oek.,  Ill,  231,  demands  that,  in 
case  of  doubt,  the  guilt  of  the  bankrupt  should  always  be  presumed. 

'  In  England  only  one-tenth  of  the  number  of  bankrupts  are  considered 
innocent.    Elliott,  Credit  the  Life  of  Commerce,  1845,  50  ff. 

^  The  contrainte  far  corps  of  debtors  was  abolished  in  France  in  1792,  but 
restored  in  1797.  Even  Turgot  remarked  that  since  slavery  had  ceased  there 
was  no  further  fear  ( .^)  that  the  poor  would  be  oppressed  by  imprisonment 
for  debt.  (Sur  le  Pr^t  d'  argent,  §  31.)  According  to  Droz,  the  question  is 
not  one  of  weighing  "  freedom  "  against  "  miserable  money,"  but  the  depriva- 
tion of  a  few  of  that  freedom  and  the  non-fulfillment  of  obligations  entered 
into,  that  is  against  the  destruction  of  public  confidence. 

•  A  similar  development  among  the  Greeks : 


Sec.  XCIII.]        MEANS  OF  PROMOTING  CREDIT.  279 

SECTION  XCIII. 

MEANS  OF  PROMOTING  CREDIT. 

One  of  the  most  efficient  means  of  promoting  credit  con- 
sists in  legislation  intended  to  dry  up  the  somxe  of  bad  debts, 
by  placing  obstacles  in  the  way  of  reckless  or  usm^ious  credits 

A.  Rigorous  slavery  for  debt,  Avhich  Kypselos  moderated  at  Corinth. 
(Pausan.,Y.  17,  2),  and  Solon  abolished  in  Athens.  (Plutarch,  Sol.,  15.  Dc- 
mosth.,  de  fals.  Legat.,  412.) 

B.  The  reckless  creation  of  debts  as  seen  in  Aristophanes;  while  outside 
of  Athens  slavery  for  debt  lasted  yet  a  long  time.  (Hermann,  Griech.  Pri- 
vatalterth.,  §  57,  20.)  In  the  time  of  Demosthenes,  the  merchant  in  arrears 
in  the  payment  of  his  debts  -was  cast  into  prison,  and  the  bottomry-debtor 
who  deprived  his  creditor  of  his  security  might  be  punished  with  death. 
(Demosth.  adv.  Phann.,  922,  95S),  and  this  although  the  cessio  honorum  was 
introduced.  Hermann,  §  70, 3.  Compare  Xenofh.,  Vectigg.,  3,  Demosth.  adv 
Apat.,  892 ;  adv.  Lacrit.,  and  and  adv.  Dionys.  In  Corinth,  the  state  superin- 
tended expenses  made  by  parties.  This  was  part  of  its  credit-policy. 
(AthcencEus,  VI,  227)  For  a  remarkable  Rhodian  law  relating  to  debts,  see 
Sext.  Emp.,  Hypot.  I,  149. 

In  Rome : 

A.  The  chief  characteristic  of  the  ancient  law  in  this  matter  was  the 
eventual  sale  of  the  person  of  the  debtor  on  the  getting  of  the  loan  (nextim) ; 
the  power  of  the  creditor  to  put  the  addictus  to  death  or  to  sell  him  in  foreign 
parts ;  finally,  the  in  partes  secanto,  in  the  concourse  of  creditors.  Without 
these  rigorous  provisions,  the  borrower  might  easily  have  evaded  his  debts, 
by  the  emancipation  of  his  son  and  turning  over  his  property  to  him.  (Nic- 
bithr,  Rom.  Gesch.,  II,  770  ff  ;  Savigny  in  the  Abb.  der  Berliner  Acad.,  1S33. 
Ztmmern,  Gesch.  des  rbm.  Privatrechts,  III,  131  ft". 

B.  Later,  we  find  nothing  of  the  execution  of  the  debtor,  or  of  the  sale  ot 
his  person ;  but  he  might  be  compelled  to  do  slave  labor  for  his  creditor 
Avithout  any  protection  against  ill-treatment.  Slavery  for  debtAvas  restricted 
by  the  Lex  Poetelia.  (Niebnhr,  III,  p.  i"]^;  Mommseu,  111,494.)  The  Praetorian 
laAV  introduced  the  custom  of  putting  the  creditor  in  possession  of  the  goods 
of  the  debtor,  Avith  poAver  of  sale,  Avhich  proceeding  rendered  the  debtor  in- 
famous. See  several  passages  in  Walter.,  Rom  Rechtsgesch,  763  ft" ;  Tcrf/dl., 
Apol.,  4;  Tab.  Herac.  I,  115  ft".  Later,  Cresar's  Lex  Julia  permitted  the  hon- 
est debtor  to  escape  imprisonment  by  the  assignment  of  his  goods. 

C.  The  moneyed  oligarchy  Avhich  prevailed  in  Rome  catised  the  adoption 
of  exceedingly  severe  measures  against  delinquent  debtors.  (Plut.,'L\xc\\\\., 
20.     Cic.,  ad.  Att.  V.  21,  VI.),  although  its  members  themselves  incurred 


280  PRODUCTION  OF  GOODS.  [B.  I,  Ch.  VI. 

for  objects  of  luxury  or  pleasure,  to  bad  customers.^  But  the 
application  of  these  laws  should  be  clear  and  simple  as  to 
their  matter,  and  require  no  inquiries,  relating  to  the  person, 
impracticable  for  a  business  man  to  make.^  Thus,  for  in- 
stance, a  short  period  of  limitation  established  by  statute  in 
the  matter  of  advances  made  for  ordinary  money-claims  is 
a  beneficial  restraint,  as  well  on  the  creditor  as  on  the  debtor, 
since  it  prevents  the  accumulation  of  a  multitude  of  small 
debts  which  almost  imperceptibly  but  at  the  same  time  irre- 
sistibly overpower  the  debtor  under  their  weight.^     Another 

debts  in  the  most  reckless  manner.  C^sar,  in  the  year  A.  C.  62,  excluding 
his  active  (acit'veu),  owed  debts  to  the  amount  of  25,000,000  sesterces;  M. 
Antonius,  in  the  year  24,  6,000,000;  in  the  year  38,  40,000,000;  Curio,  60,- 
000,000;  Milon,  70,000,000.  (Mommsen,  Romische  Geschichte,  III,  486.) 
Compare  Gelltus,  XX,  i,  XV,  14. 

'  Whenever  a  new  shop-keeper,  who  sells  goods  on  monthly  credits,  set- 
tles in  a  district,  the  number  of  poor  persons  invariably  increases.  (McCul- 
lock,  Commercial  Dictionary.)  The  ruinous  credit  given  by  the  Jews  to  the 
Westphalian  peasants  begins  with  an  account  for  the  goods  which  they  have 
succeeded  in  pressing  upon  them.,  after  five  or  six  years  have  elapsed.  The 
Jew  seldom  sues  accounts  at  law;  but  he  besieges  the  debtor  and  discovers 
where  his  last  head  of  cattle  and  his  last  little  supply  of  provisions  are  to  be 
found.  As  he  is  willing  to  accept  everything  that  has  any  value,  sometimes 
in  payment  of  arrears,  and  sometimes  in  payment  for  some  new  piece  of 
trash,  he  is  sure  to  obtain  his  dues  in  the  end,  but  not  until  his  victim,  who 
is  sunk  deeper  and  deeper  in  the  abyss  of  debt  by  every  "  accommodation," 
is  entirely  ruined.     (Schmerz,  Rheinish-Westphal.  L.  W.,  396  ft") 

-  In  the  lower  and  middle  stages  of  civilization,  we  find  a  multitude  of 
laws  by  which  minors,  students  etc.,  but  especially  land-owners  are  limited 
to  a  minimum  of  credit,  which,  however,  varies  very  much  with  the  person, 
and  is  subjected  to  a  number  of  embarrassing  forms,  the  consent  of  a  third 
person,  for  instance  etc.  (Compare  Bayerische  L.  O.  von  1553,  fol.  83.) 
Such  laws,  however,  give  as  much  room  to  the  play  of  dishonesty  as  they 
take  away  from  that  of  want  of  reflection. 

^  On  the  municipal  regulations  (Slddteoydtiungen)  oi  the  14th  and  15th 
centuries,  which  compelled  Jewish  creditors  especially  to  have  their  evi- 
dences of  indebtedness  redeemed  within  from  every  two  to  five  years,  see 
Stobbe,  Juden  im  Mittetalter,_  129.  Compare  further  the  Wiirtemberg  L.  O. 
of  1515,  Statut.  Ferrar,  ed.  1650,  lib.  II,  rub.  37,  289.  According  to  the  other 
provisions  of  the  laws  in  North  America,  some  book  accounts  were  re- 
quired to  be  sued  on  within  six  and  others  within  seventeen  years.    (Ebeling^ 


Sec.  XCIII.]         MEANS  OF  PROMOTING  CREDIT.  281 

efficient  means  is  associations  of  business  men  to  circulate  lists 
of  bad  debtors,  and  to  prosecute  their  own  demands  in  com- 
mon.'* On  the  other  hand,  experience  has  shown  that  impris- 
onment for  debt,  as  a  means  of  enforcing  a  creditor's  claim, 
where  the  amount  of  the  debt  is  very  small  and  such  as  only- 
very  poor  debtors  are  apt  to  incur,  is  of  little  service.  It  is 
even  injurious,  because  a  great  many  sellers  would  rely  on 
that  means  of  compelling  payment  in  the  future  instead  of  de- 
manding it  immediately,  as  they  should  do  in  the  interest  both 
of  themselves  and  of  their  customers.  As  a  rule,  it  is  only 
rich  creditors  who  can  resort  to  it  with  success,  a  class  who 
compel  payment  through  this  means  by  wringing  it  from  the 
debtor's  relations  more  frequently  than  from  the  debtor  him- 
self. The  working  out  of  debts  in  correctional  institutions 
seems,  for  the  same  reasons,  to  fail  of  its  object,  since  even 
well  governed  institutions  scarcely  cover  their  current  ex- 
penses from  the  income  derived  from  this  source.^  The  in- 
equitable character  of  imprisonment  for  debt  lies  in  this,  that 
it  punishes  the  unfortunate  debtor  as  severely  as  it  does  the 
malicious  one.  It  must  be  clearly  distinguished  from  the  im- 
prisonment recognized  by  the  courts  as  a  punishment  for  reck- 
less or  fraudulent  bankruptcy ."^     We  must  pass  a  judgment 

Gerchichte  und  Erdberchreibung  der  v.Staaten,  11,247,  298.)  The  Prussian 
law  of  March  31,  1S38,  provides  a  period  of  limitation  of  three  years  for  all 
ordinary  commercial  debts.  A  similar  law  was  passed  in  the  Kingdom  of 
Saxony,  in  1846.  In  London,  there  has  been  found  a  great  number  of  hat- 
ters, tailors,  boot  and  shoe  dealers  etc.,  whose  books  showed  credits  of  more 
than  £4,000,  most  of  them  not  to  exceed  over  £10.  How  much  of  all  this 
must  be  lost  entirely,  and  how  that  loss  must  increase  the  sums  paid  for 
boots,  shoes  and  hats  by  the  prompt  payer!  (McCulloch^  v.  Credit.)  We 
find,  even  in  Athens,  that  the  period  of  limitation  was  shortened  in  the  in- 
terest of  credit,  and  that  in  the  case  of  minors,  it  did  not  exceed  five  years. 
(Demosth.  adv.  Nausim.,  989.)  Security  for  a  debtor  not  over  one  year. 
(Dcmosth.,  adv.  Apatur.,  901.)  The  prohibition  of  Zaleukos  to  issue  any  ev- 
idences of  debt  whatever  goes  much  farther.     (Zetiob.,  Proverb.  V,  4.) 

4  Compare  the  report  of  the  Dresden  Handelskammer,  1864,  11. 

^  A.  Mayer,  in  Fauclier''s  Vierteljahrsschrift,  1S65,  IV,  65. 

8  We  learn  from  the  debates  in  the  English  parliament  of  February  9, 


282  PRODUCTION  OF  GOODS.  [B.  I,  Cii.  IV. 

similar  to  tliat  on  the  imprisonment  of  the  person  of  the  debtor 
on  the  seizure  of  his  wages  not  yet  due,  so  far,  at  least,  as  an 
amount  absolutely  necessary  to  save  himself  and  family  from 
want,  is  not  excepted.  The  prohibition  of  such  seizure,  be- 
yond this,  would  amount  to  a  declaration  that  all  workmen 
without  capital,  even  the  best,  should  be  considered  un- 
worthy of  credit.'^  We  may  also  include  in  this  category 
such  laws  as  except  from  execution  the  necessary  tools  of  a 
tradesman,  since  to  deprive  him  of  them  would  be  to  pre- 

1827,  that,  in  two  years  and  a  half,  there  were,  in  London  and  its  environs, 
70,000  cases  of  imprisonment  for  debt,  tlie  costs  of  which  were  from  £i5o,ooa 
to  £200,000.  In  1S31,  there  were  in  one  debtors'  prison  1,120  prisoners,  who 
owed  on  an  average  £2  3s.  2d.  (AlcCidloch,  1.  c.)  Tliere  was,  in  1792,  a  case 
of  a  woman  who,  for  a  debt  of  £19,  remained  in  prison  45  years,  and  others 
like  it.  (See  Archenholtz,  Annalen,  IX,  87  ff;  X,  169  ft,  XIII,  125.)  In  En- 
gland in  1844,  arrest  for  sums  less  than  £19  was  prohibited.  Johnson  had  al- 
ready proposed  a  similar  provision.  (Idler,  1758,  Nos.  22  and  38.)  Impris- 
onment for  debt  was  abolished  in  France,  England  and  Austria  in  1867;  in 
the  Nortli  German  Confederation,  on  the  29th  of  May,  1S68,  but  arrest  for  se- 
curity's sake  was  retained.  Sismondi  finds  fault  with  nearly  all  laws  in  the 
premises,  because  they  attack  the  person  of  the  debtor  rather  than  his  per- 
sonal property,  and  his  personal,  rather  than  his  immovable,  property.  He 
would  have  all  this  just  the  contrary  of  what  it  is.  The  first  interferes  with 
the  very  source  of  wealth,  the  productive  power  of  labor;  the  second  causes 
goods  to  be  sold  much  below  their  value.  Neither  of  these  evils  attends  the 
last.     (N.  PrincipeSy  I,  250.) 

'  A  law  of  the  North  German  Confederation  allows  the  pledging  of  future 
wages,  only  in  the  case  of  public  officers,  and  those  holding  permanent  places 
in  the  service  of  private  parties,  whose  salaries  are  over  400  thalers  per  an- 
num. The  original  draft  had  excepted  only  the  things  necessary  to  workmen 
and  those  directly  depending  on  them ;  while  the  law  as  passed  makes  the 
prohibition  general.  This  was  undoubtedly  done  for  the  convenience  of  em- 
ployers as  well  as  of  courts ;  as  for  instance  in  the  circuit  of  Dortmund, 
there  were,  in  one  year,  10,000  cases  in  which  wages  were  garnisheed.  (An- 
nalen des  N.  D.  Bundes  und  Zollvereins,  1869, 1071  ft".)  But  the  recklessness 
of  those  workmen  whose  wages  are  below  the  average,  might  have  been 
just  as  well  guarded  against  without  dragging  those  whose  wages  are  above 
the  average  down  to  their  level,  if  a  distinction  had  been  made  between  pro- 
duction-credit and  consumption-credit,  and  the  latter  had  been  limited  by  pro- 
viding that  no  suit  should  be  instituted  for  supplies  made  to  public  houses, 
taverns  etc. 


Sfx.  xciv.]  letters  of  respite.  283 

vent  his  employing  even  his  labor  to  satisfy  ^  his  creditors' 
claims. 

SECTION  XCIV. 

letters  of  respite  (SPECIALMORATORIEN). 

special  letters  of  respite  (S-peciahnoratorien)  are  a  suspension 
of  the  laws  relating  to  debt,  made  in  favor  of  an  individual. 
(^linquennalia.)  They  were  intended  to  protect  not  onl}^ 
the  debtor,  but  also  the  aggregate  of  creditors  against  the 
sVort-sighted  severity  of  one  of  their  number.  They  were 
wont  to  be  given  especially  when  the  debtor  showed  that  im- 
mediate execution  would  not  only  have  the  effect  of  ruining 
himself,  but  of  sending  his  creditors  away  empty  handed; 
while,  if  time  were  given  him,  he  would  be  able  to  satisfy 
every  one.^  But  the  granting  of  such  letters  has,  in  recent 
times,  been  prohibited  ^  in  nearly  all  countries  as  arbitrary,  and 

8  In  the  second  book  of  Moses,  22,  25  fF.,  and  the  fifth,  24,  6.  A  very  old 
Norman  law  provides  that  in  actions  for  debt,  execution  should  not  issue 
against  effects  of  the  debtor  which  are  indispensably  necessary  to  him  to 
maintain  his  position,  such  as  the  horses  of  a  count  or  the  armor  of  a  knight. 
(Dialog,  de  Scaccario.)  Magna  Charta  extended  this  provision  so  as  to  in- 
clude the  agricultural  implements  and  cattle  of  the  peasanti-y.  The  moment 
tliese  laws,  in  consequence  of  a  false  principle  of  humanity,  except  anything 
but  what  is  absolutely  necessary,  they  injure  credit.  Thus,  for  instance,  in 
Brazil,  a  law  of  1758,  providing  that  nothing  immediately  employed  in 
or  directly  necessary  to  the  production  of  sugar  should  be  seized  on  execu- 
tion, caused  great  injury  to  the  production  of  sugar.  (Koste>\  Travels  in 
B.,  1S16,  356  ff. 

'  §  2,  Cod.  De  Prec.  Imper.  Off.,  I,  19.  The  diets  of  the  Empire  had  granted 
such  letters  in  the  fourteenth  century.  (WacJisniutli,  Europ.  Sittengesch., 
IV,  690.)  They  were  granted,  as  a  rule,  only  with  the  previous  knowledge 
of  the  Emperor,  by  the  police  ordinances  of  the  Empire  of  1548,  art.  22. 

2  So  in  Austria,  Saxony,  Brunswick,  the  electorates  of  Hesse  and  Baden. 
In  Prussia,  they  could  be  granted  only  after  a  juridical  decree  to  that  effect; 
and  an  appeal  to  a  superior  court  was  allowed  to  reverse  or  affirm  it.  Com- 
pare Mittermaier  in  the  Archiv.  fiir  civilist.  Praxis,  XVI,  and  also  P.  de  la 
Court,  Aanwysing  der  politike  Gronden  en  Maximen  van  Holland  etc.,  1669, 
I,  ch.  25.     Niirnberg  obtained  as  a  privilege,  in  1495,  that  no  moratorium 


284  PRODUCTION  OF  GOODS.  [B.  I,  Ch.  VI. 

as  a  species  of  cabinet-justice.  Nor  should  the  granting  of 
them  be  compared  with  the  pardoning  power.  In  the  case  of 
a  pardon,  the  oflended  State  forgives.  In  this  case  it  sacrifices 
the  unquestionable  right  of  one  party  to  the  very  doubtful  ad- 
vantage of  another.  Where  such  letters  are  granted  in  great 
numbers,  credit  cannot  fail  to  suffer.  "  ^uinquinnellen  gehoren 
in  die  Ho  lien  I " 

Yet  in  troublous  times,  when  a  great  many  debtors  are  in- 
solvent at  the  same  time,  the  question  of  modifying  the  laws 
relating  to  debt,  temporarily,  has  been  mooted.  It  has  been 
urged  on  such  occasions,  that  it  would  be  a  matter  of  enor- 
mous difficulty  to  treat,  lege  artis,  thousands  as  bankrupts  a\ 
Qnce ;  that  thousands  of  businesses  would  have  to  be  closed, 
their  stocks  cast  upon  the  market  at  mock  prices,  and  their  em- 
ployees thrown  out  of  employment.  But,  if  certain  privileges 
were  to  be  accorded  to  all  who  should  declare  themselves  un- 
able to  meet  their  obligations  before  a  certain  day,  it  would 
be  known,  at  least,  that  the  others  were  in  a  solid  condition; 
and  this  would  have  the  effect  to  strengthen  the  credit  which 
had  been  before  universally  shaken.  We  must,  however, 
leaving  all  cases  of  abuse  out  of  the  question,  remember,  that 
a  really  unrightful  favor,  granted  to  the  debtor,  may  possi- 
bly entail  the  ruin  of  his  creditor.  Besides,  the  uncertainty  of 
the  law  would  have  a  much  worse  eflect  on  credit  than  uncer- 
tainty as  to  the  personal  status  of  individuals.^  Where,  as  is 
the  case  generally  in  inferior  stages  of  civilization,  debtors  and 
creditors  form  two  distinct  classes,  the  question  of  right  is  not, 
indeed,  changed,  but  there  is  a  solid  basis  afforded  for  the 
political  admeasurement  of  opposing  interests.     In  another 

should  be  valid  as  against  its  citizens.  (Rotk,  Geschichte  des  Niirnb.  Han- 
dels,  I,  86.) 

^  Compare  the  discussions  in  the  French  National  Assembly,  in  the  month 
of  August,  1848.  It  is  much  less  disadvantageous  in  times  of  great  commo- 
tion, when  all  business  is  brought  to  a  stand  still,  to  extend  the  time  in  which 
bills  of  exchange  etc.  are  payable.  Such  a  measure  prevents  a  number  of 
bankruptcies  which  the  real  balance  of  debts  due  to  one  and  owing  by  him 
does  not  render  necessary. 


Sec.  XCIV.]  LETTERS  OF  RESPITE.  285 

work  I  have  shown  how,  after  great  w^ars,  land  owners,  who 
became  involved  in  debt,  have  been  protected  against  cap- 
italists.     (See  Roschci'^  Nationalokonomik  des  Ackerbaues, 

*  In  the  persecution  of  the  Jews  in  the  middle  ages,  tlie  so-called  Brief - 
tddteti  (letter-killing),  or  the  destruction  of  titles,  was  very  common.  In 
iiSS,  the  French  government  released  all  crusaders  from  the  payment  of  in- 
terest on  their  debts,  and  granted  them  an  extension  of  three  years'  time  to 
pay  oft'  the  principal.  (SisDwiidi,  Hist,  des  Fran9ais,  VI,  82.)  Similar  com- 
pulsory measures  were  provided  against  the  Jews  and  usurers  in  1223  (Ibid, 
VI,  539  ff.);  and  in  1299  (Ordonnances,  I,  '1331),  on  the  formal  request  of  the 
nobility.  (Ordonnances,  II,  59.)  Again,  in  1594,  there  was  a  release  of  one- 
third  of  the  interest  on  all  national  and  private  debts.  (Stsmondt,  XXI,  318.) 
The  general  moratorium  of  the  Milanese  for  a  term  of  eight  years,  introduced 
in  125 1,  after  their  war  with  France,  was  of  an  essentially  different  character. 
(Sismondi,  Geschichte  der  italienischen  Republiken,  III,  155.)  The  same  is 
true  of  the  general  indidt  granted  by  Philip  II.  in  Belgium.  (Boxhorn^  Dis- 
quisitt.  politicnc,  241  ff".) 

^  The  abolition  or  release  of  debts,  so  frequent  in  ancient  revolutionary 
times,  reminds  us,  in  many  ways,  of  the  crises  precipitated  in  modern  times 
by  paper  money  and  produced  by  the  state.  The  ancestors  of  Alcibades 
and  Hipponikos  laid  the  foundation  of  an  immense  fortune,  in  Solon's  time, 
by  purchasing  land  in  large  quantities  with  money  borrowed  from  several 
citizens,  a  short  time  before  the  abolition  of  debts.     (Plutarch,  Sol.,  15.) 


BOOK  II. 


THE  CIECULATION  OF  GOODS. 


CHAPTER  I. 

CIRCULATION  IN  GENERAL. 


SECTION  XCV. 

MEANING  OF  THE  CIRCULATION  OF  GOODS. 

The  more  highly  developed  the  division  of  labor  is,  the 
more  frequent  and  necessary  do  exchanges  become.  While 
the  hermit  engaged  in  production  thinks  only  of  his  own  wants, 
and  the  mere  housekeeper  of  the  w^ants  of  his  household,  the 
man  w'ho  is  part  of  a  nation  and  who  plays  a  part  in  its  gen- 
eral economy,  must  bear  in  mind  the  market  in  which  goods 
of  one  kind  are  exchanged  against  goods  of  other  kinds.  The 
greater,  more  various  and  more  changeable  the  conditions  of 
this  market  are,  the  greater  are  the  intellectual  faculties  de- 
manded to  engage  in  it  successfully,  and  to  the  advantage  of 
everybody  concerned  in  it.^     Goods  intended  to  be  exchanged 

'  Enormous  consumption  of  wax  in  the  churches  of  the  middle  ages.  In 
the  cathedral  of  Wittenberg  alone,  a  short  time  before  the  Reformation, 
more  than  35,000  pounds  of  wax  candles  etc.  were  burned  yearly.  At  the 
same  time,  honey  was  generally  used  instead  of  sugar.  Haw  much  more 
important,  therefore,  at  that  time  must  bee-culture  have  been,  considered 
from  the  point  of  view  of  circulation  as  compared  with  what  it  is  to-da\-. 
And  so  in  Catholic  countries,  a  difference  in  the  external  manifestation  of  re- 
ligion causes  the  relative  importance  of  the  consumption  of  fish  to  increase 
and  decrease.  In  1S03  there  was  little  demand  in  France  for  ivory  crucifixes, 
rosaries  etc.  In  1844,  the  demand  for  them  and  iov;prie-Dieu  for  the  bed-room 
etc.  was  increased.  (Mohl,  Gewerbwissenschafliche  Reise,  loi.)  To  engage 
successfully  in  the  sale  of  sugar  in  Persia,  it  is  necessary  to  know  that  in  that 
Vol.  I. — 19 


290  CIRCULATION  OF  GOODS.  [B.  II,  Cii.  I 

are  called  commodities.  By  the  circulation  of  commodities  is 
meant  their  going  over  from  one  owner  to  another.^  Among 
the  principal  causes  of  circulation,  we  may  mention  the  differ- 
ence in  the  nature  and  civilization  of  countries  and  peoples, 
the  distinction  betweenxity  and  country,  the  division  of  people 
into  classes  etc.^  The  rapidity  of  circulation  depends,  on  the 
one  hand,  on  the  quantity  of  commodities,  and  on  the  other,  on 
the  degree  to  which  the  division  of  labor  has  been  carried.  In 
both  respects  it  is,  therefore,  an  important  indication  of  the 
wealth  of  the  nation,  and  of  the  world. 

Different  commodities  have  very  different  degrees  of  capac- 
ity for  circulation  (Circidatiotisfahigkeit)^  that  is,  of  certainty 
of  finding  purchasers,  and  of  facility  of  seeking  purchasers. 
The  smaller,  compared  with  its  value,  the  volume  and  weight 
of  a  commodity  are ;  the  longer  and  more  conveniently  it  can 
be  stored  away;  the  more  invariable  and  well-known  are  its 
value  in  use  and  value  in  exchange:  the  more  readily  does  it 
go  from  one  place  to  another,  the  more  easily  is  it  transmitted 
from  one  period  of  time  to  another  and  from  the  possession  of 
one  person  into  the  possession  of  another.  Thus,  for  instance, 
the  precious  metals  circulate  more  rapidly  than  industrial  pro- 


country  it  is  liked  only  in  little  hat-shaped  lumps,  which  are  used  only  as  semi- 
voluntary  gifts ;  and  that,  in  such  case,  custom  fixes  the  number  of  lumps. 
(Steinhatcs,  Russlands  commercielle  etc.  Verhh.,  151.)  In  the  Levant, 
workmen  prefer  bars  of  iron  which  are  small  and  of  varied  form  because 
they  find  it  difficult  to  manipulate  the  large  ones.  The  English  bear  this  in 
mind  much  better  than  the  Russians.  (Steinhaiis.)  A  merchant  sending 
wood  to  Southern  France  must  be  acquainted  with  the  form  of  the  staves 
used  in  the  manufacture  of  barrels  there.  Compare  BUsch,  Geldumlauf, 
VI,  2,  2. 

'^  The  circulation  of  goods  compared  to  the  circulation  of  the  blood :  by 
Mirahean.,  Philosophie  Rurale,  ch.  3.  Turgot,  Sur  la  Formation  etc.  §  69. 
Canard.,  Principes,  ch.  6. 

3  Eiselen,  Volkswirthschaftslehre,  98  ff.  If  in  ancient  times  commerce 
played  a  much  less  important  part  than  it  does  among  the  moderns,  it  was,  as 
Montesquieu  says,  because  the  whole  commercial  world  was  then  more  uni- 
form in  climate  and  the  character  of  its  products  than  it  is  nov;^.  (Esprit  des 
Lois,  XXI,  4. 


Sec.  XCV.]  MEANING  OF  CIRCULATION.  291 

ducts;  these  in  turn  more  than  raw  material,^  and  immovable 
property  circulates  least  rapidly  of  all.  An  improvement  in  the 
means  of  transportation  naturally  increases  the  capacity  of  cir- 
culation of  the  entire  wealth  of  a  people,  and  especially  of  those 
commodities  which  were  not  before  transferable  as  well  as 
of  those  of  which  the  cost  of  transportation  constituted  a  pecu- 
liarly large  component  part  of  the  price.^  The  greater  the 
capacity  for  circulation  of  any  kind  of  goods,  the  greater  is 
the  power  of  control  of  its  owner  in  the  world  of  trade.  If 
we  compare  two  men,  each  of  whom  possesses  a  million  of  dol- 
lars, but  one  of  whom  has  that  million  in  money  and  the  other 
in  land,  we  shall  find  that  the  former  is  able,  for  present  pur- 
poses, such  as  loaning  to  the  state  in  case  of  need,  aiding  a 
conspiracy  etc.,  to  command  resources  much  more  readily  and 
efTectively  than  the  latter.  Under  the  ordinary  circumstances 
of  a  nation's  economy,  we  find  that  the  owner  of  money  is 
very  seldom  in  want  of  bread,  fuel  or  clothing,  whereas  very 
many  owners  of  other  property  may  be  in  want  of  money.^ 
True,  resources  which  may,  so  to  speak,  take  the  offensive 
most  energeticalh^,  offer  less  resistance  to  unforeseen  misfor- 
tune. The  possessor  of  such  resources  is  in  a  condition  to  lose 
his  all  on  the  turn  of  a  single  die.  As  civilization  advances, 
the  circulating  capacity  of  a  nation's  wealth  increases.''' 

■*  Of  the  successive  steps,  sheaves,  corn,  flour,  bread,  —  flour  has  the  great- 
est capacity  for  circulation.  And,  indeed,  the  last  operation  of  labor  on  a 
great  many  goods,  because  of  their  consequent  more  narrowly  specialized 
utility,  is  accompanied  by  a  decrease  in  their  capacity  for  circulation.  As  an 
illustration,  we  may  mention  ready-made  clothing  as  compared  with  cloth. 
The  capacit}^  for  circulation  of  a  commodity  is  very  much  advanced  when 
the  demand  is  wont  to  increase  with  the  supply,  as  is  the  case  with  gold  and 
silver,  but  not  with  learned  books,  optical  instruments  etc.  Many  commod- 
ities have  but  little  circulating  capacity,  because  no  one  desires  to  purchase 
them  but  at  first  hand.     See  Menge>\  Grundsatze,   I,  245  ff. 

5  K7itcs.,  Die  Eisenbahnen  und  ihre  Wirkungen,  1853,  79. 

^  Compare  Schmittheiiner,  I,  who  calls  attention  and  with  reason  to  the  im- 
portance of  loans  on  chattel  mortgages.  But  Berkeley,  Querist,  No.  265, 
remarks  that  a  squire  with  a  yearly  income  of  £1000  can,  "  upon  an  emer- 
gency," do  less  good  or  evil  than  a  merchant  with  £20,000  ready  money. 

'  A  very  important  difterence  between  Russia  and  England. 


292  CIRCULATION  OF  GOODS.  [B.  II,  Ch.  I. 

SECTION  XCVI. 

RAPIDITY  OF  CIRCULATION. 

With  an  advance  in  a  people's  public  economy,  we  find  an 
increased  rapidity  of  circulation  connected,  both  as  cause  and 
effect.  Every  improvement,  every  thing  which  shortens  the 
process  of  production,  must  facilitate  and  accelerate  the  circu- 
lation of  commodities.  And  so,  the  perfecting  of  the  means 
of  transport  of  commodities,  of  the  media  of  exchange  and  of 
credit,  an  increase  in  the  number  of  middlemen  who  make  it 
their  business  to  purchase  in  order  to  sell  again.  On  the  other 
hand,  the  more  rapid  the  circulation  of  wealth,  the  more  can 
it  promote  production.  The  more  rapidly,  for  instance,  the 
manufacturer  of  cloth  exchanges  his  wares  for  money,  the 
more  rapidly  may  he  employ  the  money  in  the  purchase  of 
new  tools  and  the  hiring  of  new  labor;  and  the  sooner  may  he 
appear  in  the  market  with  new  cloth.  It  is  here  precisely  as 
it  is  in  agriculture,  which  is  more  productive  where  the  seed 
returns  several  times  in  a  year  (several  crops  ^)  to  the  hand  of 

'  SiorcJi,  Handbuch,  I,  273  ff.  There  is  also  a  useless  circulation  which  is 
not  calculated  to  promote  the  division  of  labor,  but  to  employ  idle  time  or 
idle  capital,  as  in  the  case  of  games  of  hazard,  speculation  in  stocks,  wheat 
etc.  Even  impoverishing  consumption  may  produce  rapidity  of  circulation, 
as  in  Germany  during  the  war  years  1812  and  1S13.  (F.  G.  Scliulzc^  N. 
Qikonomie,  1856,  667.)  Relying  on  this  fact,  Hume  (1752)  on  Public  Credit, 
Discourses,  No.  8,  argues  in  favor  of  the  old  opinion,  that  all  circulation  is 
wholesome  and  to  be  encouraged.  Boisgttillcberf,  Traite  des  Grains,  I,  6, 
went  so  far  as  to  laud  war  because  it  accelerated  the  circulation  of  wealth. 
On  the  necessity  of  a  circulation  sans  i'e^os,see  ibid.,  II,  10.  In  a  similar  way, 
Law,  Trade  and  Money,  1705,  and  Dutos,  Reflexions  "Politiques  sur  le  Com- 
merce, over- valued  the  circulation  of  wealth  as  such.  Concerning  the  Mer- 
cantile System,  see  §  116.  Darjes,  Erste  Griinde  der  Camerahvissenschaft, 
1768,  531.  And  even  Biisc/i,  Geldumlauf,  I,  29,  32  ff..  Ill,  96,  who  in  other 
places  nearly  always  overlooks  real  production  and  sees  only  the  circula- 
tion of  money  caused  thereby.  Thus  he  calls  the  poor  when  they  are 
helped  in  money,  and  spend  it,  useful  members  of  society!  (IV,  32,  39.) 
Similarly,  v.  Stfuensee,  Abhandlungen,  1800,  I,  2S2  ff.,  400  ff. 


Sec.  XCVII.]  FREEDOM  OF  COMPETITION.  293 

the  peasant  than  it  is  where  this  liappens  only  once.  The 
nearer  the  members  of  the  commercial  organism  are  to  one 
another,  the  more  rapid  is  circulation  wont  to  be.  Hence,  it 
is  more  rapid  in  industry  than  in  agriculture ;  in  retail  trade 
than  in  wholesale;  in  large  cities  than  in  the  country;  among  a 
dense  population  than  among  a  sparse  population. 

The  regularity  of  circulation  increases  with  economic  cul- 
ture. Its  concentration  at  large  terminal  points,  its  interrup- 
tion by  bad  seasons  of  the  year,  belong  to  the  lower  stages  of 
the  political  economy  of  a  people;  although  bad  harvests, 
floods,  wars,  revolutions  etc.  may,  at  any  time,  lead  to  a  slug- 
gishness or  to  an  arrest  of  circulation. 

SECTION  XCVII. 

FREEDOM  OF  COMPETITION. 

But  it  is  especially  the  freedom  of  circulation  that  increases 
with  an  advance  in  civilization,  and  this  advance,  like  the  two 
preceding,  first  aflects  the  home  or  inland  circulation.  Free- 
dom of  competition,  the  freedom  of  commerce  and  industry, 
technical  expressions  used  to  designate  freedom  in  general  in 
the  domain  of  a  nation's  economy,  is  the  natural  conclusion 
drawn  from  the  principles  of  individual  independence  and  of 
private  property.  Hence  its  development  is  as  slow  as  the 
development  of  these,  and  attains  its  fuU  growth  only  in  high- 
ly cultivated  nations,  their  colonies  and  dependencies.  In  very 
low  stages  of  economic  development,  the  circulation  of  goods 
is  hampered  by  the  absence  of  legal  security ;  later,  by  priv- 
ileges accorded  to  a  great  number  of  families,  corporate 
bodies,  municipalities,  classes,  etc.,  and  later  yet  by  the  mighty 
guardianship  which  the  state  exercises  by  its  power  of  legis- 
lation and  even  of  education.^     Each  one  of  these  epochs  con- 

'  As,  for  instance,  happened  in  France  in  1577,  when  all  commerce,  and  in 
1585  all  industry,  were  declared  to  be  de  droit  domanial.  Louis  XIV.  was  of 
opinion  that  the  king  ^^•as  absolute  master  of  all  private  property  of  priests 


294  CIRCULATION  OF  GOODS.  [B.  II,  Cn.  I. 

stitutes  the  end  of  the  preceding  one,  and  is  milder  than  it  was. 
Finally  comes  the  period  of  complete  freedom,  when  every 
man  is  permitted  to  manage  his  own  affairs  even  with  injury 
to  himself,  provided  the  injury  is  confined  to  himself; 

The  later  times  of  the  Roman  Empire  are  the  best  illustra- 
tion of  how,  with  the  decline  of  the  conditions  which  must  pre- 
cede freedom  of  competition,  that  freedom  itself  decays.^ 

Freedom  of  competition  unchains  all  economic  forces,  good 
and  bad.  Hence,  when  the  former  preponderate,  it  hastens 
the  time  of  a  people's  grandeur,  as  it  does  their  decline  where 
the  latter  gain  the  upper  hand.®  We  may  say  of  economic  free- 
dom what  may  be  said  of  all  other  freedom,  that  the  removal  of 
external  constraint  can  be  justified  and  produces  the  greater 
good  of  the  greater  number  only  where  a  stern  empire  over  self 
takes  its  place.  Without  this  it  would  not  prevent  or  avoid  idle- 
ness, usury  or  over-population.  Freedom  must  not  be  simply 
negative.  It  must  be  positive.  If  on  account  of  the  immatur- 
ity or  over-maturity  of  a  people,  there  be  no  sturdy  middle 
class  among  them,  unlimited  competition  may  become  what 
Bazard  calls  a  general  $aitve-qtn-peut  (let  the  devil  take  the 
hindmost);  what  Fourier  designates  as  a  7norcellement  indus- 
iriel,  and  a  fraude  commerciale ;  what  M.  Chevalier  denomi- 
nated "  a  battle-field  on  which  the  little  are  devoured  by  the 

and  people.  (Mdmoires  histor.  de  Louis  XIV.,  II,  121.)  Compare  Duclos, 
Mdjnoires,  I,  14  ff. 

*  Compare Theod.  Cod.,  V,  9,  i ;  Just.  Cod.,  X,  19,  8;  XI,  47,  21,  23;  XI,  50, 
51,  52,  55,  58.  How  full  the  really  classic  period  of  the  Roman  jurists  was 
of  the  idea  of  freedom  of  competition,  we  see  in  Paullus:  L.  22,  §  3,  Dig. 
XIX,  2.  The  provisions  concerning  Icesio  enormis  appear  first  in  the  time 
of  Diocletian.     (Just.  Cod.,  IV,  44,  2.) 

'^Benjamin  Franklin  says  that  the  freer  the  form  of  government  is,  the 
more  the  people  show  themselves  in  their  true  aspect.  Ancient  Rome,  with 
the  early  development  of  its  rational  disposition,  soon  learned  to  favor  free- 
dom of  commercial  intercourse.  Compare  Mommsen,  Romische  Geschichte, 
I,  passim.  This  was,  certainly,  an  element  of  its  greatness,  but  also  of  the 
proletarian  evils  developed  in  it  an  early  date,  and  which  were  weighed  down 
only  by  the  absolute  growth  of  the  state  and  the  development  of  its  eco- 
nomic interests  during  centuries. 


Sec.  XCVIL]  FREEDOM  OF  COMPETITION.  295 

big;"  and  in  such  case,  as  Bodz-Reymond  says,  the  word 
competition,  meaning  simply  that  each  one  is  permitted  to  run 
in  whatever  direction  he  may  see  a  door  open  to  him,  is  but 
another  and  a  new  expression  for  vagabondizing.  But  here 
the  evil  does  not  lie  in  too  great  competition,  but  in  this,  that 
on  one  side  there  is  too  little  competition.'*  The  opposing  prin- 
ciple of  competition  is  always  monopoly,  that  is,  as  John  Stuart 
Mill  says,  tlie  taxation  of  industry  in  the  interest  of  indol- 
ence and  even  rapacity;  and  protection  against  competition  is 
synonymous  with  a  dispensation  from  the  necessity  to  be  as 
industrious  and  clever  as  other  people. 

A  protection  of  this  nature,  sufficiently  effective  to  attain  its 
end,  would  not  fail  to  arrest  the  efforts  of  those  who  had  ac- 
complished something,  and  even  to  turn  them  backward. 
That  freedom  of  competition  is  a  species  of  declaration  of  war,^ 
among  men  considered  as  producers,  is  certain ;  but,  at  the 
same  time,  it  makes  all  men  considered  as  consumers  mem- 
bers of  one  society,  in  which  all  the  members  are  equally  in- 
terested, a  fact  too  much  overlooked  by  socialists.®  It  is  the 
means  especially  by  which  the  greatest  and  ever  increasing 
portion  of  the  forces  of  nature  are  raised  to  the  character  of 
the  free  and  common  property  of  the  human  race.'''  "  Man  is 
not  the  favorite  of  nature  in  the  sense  that  nature  has  done 
everything  for  him,  but  in  the  sense  that  it  has  endowed  him 
with  the  ability  to  do  everything  for  himself.  The  right  of 
freedom  of  competition  may,  therefore,  be  considered  both 

*  Nor  must  it  be  forgotton  that  competition  raises  prices  as  well  as  lowers 
them.  The  expressions  higher  price  and  lower  price  denote  only  different 
sides  of  the  same  relation.  M.  Chevalier  is  of  opinion  that  our  present 
breathless  competition  is  characteristic  only  of  a  period  of  transition  prolific 
in  new  inventions,  a  competition  soon  to  be  followed  by  peace.  (Cours,  II, 
450  ff.) 

^  'Ayad-Yj  lore  >      Hesiod.^  Opp.,  10  fF. 

«  "  Whoever  speaks  of  competition  suppresses  the  existence  of  a  common 
aim,"  says  Protidkon,  although  he  adds,  after  Bilcatiis  way,  that  to  cure  the 
evils  of  competition  by  competition,  is  as  absurd  as  to  lead  men  to  liberty 
by  liberty,  or  to  cultivate  the  mind  by  cultivation  of  the  mind. 

'  Compare  Bastiat,  Harmonies  dconomiques,  ch.  10. 


296  CIRCULATION  OF  GOODS.  [B.  II,  Ch.  I. 

the  protection  and   the  image  of  this   provision  of  nature. 
(Zacharid.f 

The  person,  therefore,  who  claims  or  asserts  an  exception 
from  the  rule  of  free  competition,  has  to  prove  his  position  in 
every  individual  case,  since  the  burthen  of  proof  is  on  him. 
But  the  duty  of  interference  on  the  part  of  the  state  is  posi- 
tively pointed  out  where  any  interest  common  to  the  whole 
people  is  not  in  a  condition  to  assert  itself;  and  negatively, 
v/hen  the  custom  which  hitherto  had  prevented  an  undoubted 
abuse  has  grown  too  weak  to  continue  to  perform  that  service. 
In  both  regards  I  would  call  attention  to  the  protection  of  fac- 
tory children  against  the  concurrent  selfishness  of  their  parents 
and  masters.^  ^'^     Supra,  §  39. 

^  If  all  classes  were  protected  against  competition,  no  class  would  derive 
anj  advantage  from  it,  since  a  "  universal  privilege  "  is  an  absurdity.  If  only 
certain  classes  or  individuals  are  protected,  it  is  done  at  the  cost  of  all  others. 

^  The  question  should  not  be  formulated  thus:  "  Caprice  or  rule.^"  but 
"Rule  of  morals,  or  rule  of  law.'"'  Schmollcr  against  v.  Trcitschhc  in  Hilde- 
brafid's  Jahrbb. 

i'"  Concerning  the  arguments  by  which  the  commercial  restrictions  of  the 
middle  ages  were  defended,  see  below.  They  were,  for  the  most  part,  well 
founded  for  the  age  in  which  they  were  advanced.  A  judicious  education 
will  often  be  compelled  to  provide  limitations,  but  always  with  the  intention, 
by  this  means,  of  making  possible  a  really  greater  independence.  Thus  the 
current  of  commerce  may  be  too  weak  in  a  poor  and  thinly  settled  country 
in  order  that  supply  and  demand  should  always  and  everywhere  meet  and  be 
satisfied.  Under  such  circumstances,  their  artificial  concentration  at  certain 
points  is  among  the  most  efficient  means  of  promoting  the  economy  of  the 
whole  people.  The  policy  of  freedom  of  commerce  was  recommended  even 
in  the  seventeenth  century  by  J.  Child,  by  North  and  Davenant.  W.  Roscher, 
Zur  Geschichte  der  englisch.  Volkswirthschaftslehre,  65  ft'.,  85  ft",  113  ft".,  143 
ft".  And  earlier  yet,  in  Holland,  by  Salmasius,  De  Usurus,  163S,  583  and  dela 
Court.  Compare  Tiibinger  Ztschr.,  330  ft".  Thus  Bots^uillcdo-t  says:  /I  fiy 
avait  qii'd,  laisscr  fairc  la  nature  et  la  libcrtd,  qui  est  Ic  commissionaire  de  cette 
meme  nature.  (Factum  de  la  France,  1707,  ch.  5.)  See,  also.  Dissertation  sur 
la  Nature  des  Richesses,  ch.  VI;  Detail  de  la  France,  1697,  II,  ch.  13;  Tr. 
des  Grains,  II,  8.    For  the  most  part  dictated  by  a  reaction  against  Colbertism. 

See  further,  Milon,  Essai  Politique  sur  le  Commerce,  1734,  ch.  2.  M. 
Decker,  Essay  on  the  Causes  of  the  Decline  of  Foreign  Trade,  1744,  31  fF, 
106  ff.  y.  Tucker,  Essay  on  the  advantages  and  disadvantages  which  re- 
spectively attend   France  and  Great  Britain  with  regard  to  Trade,   1750. 


Sec.  XCVIIL]        HOW  GOODS  ARE  PAID  FOR.  297 

SECTION  XCVIIL 

HOW  GOODS  ARE  PAID  FOR.  — THE  RENT  FOR  GOODS. 

Payment  for  goods  (§  i  K)  of  any  kind  can  be  made  only  in 
other  goods.^  ~     Hence,  the  greater,  more  varied,  and  the  bet- 

Forhonnais^  Elemens  du  Commerce,  1754,  I,  63.  Gcnovcsi,  c.  I,  17,  3,  is  of 
opinion  that  at  least  in  case  of  doubt,  commerce  stood  more  in  need  of  free- 
dom than  of  protection.  Verri,  in  his  Meditazioni,  goes  still  farther.  The 
Physiocrates,  with  their  laissez  oiler  and  laissez  faire  recommend  competition 
as  the  best  means  to  increase  the  net  income  of  a  people.  According  to  Du- 
font,  147  if,  ed.  Daire,  the  province  of  legislation  is  confined  to  declaring  the 
laws  of  nature.  His  motto  is:  liberie  and fropricte.  Adam  Smith  asks  that 
the  state  should  do  only  three  things:  insure  protection  against  foreign 
states,  the  administration  of  justice  at  home,  the  establishment  and  mainte- 
nance of  certain  institutions  of  advantage  to  the  whole  coinmunity,  but 
which  private  interest  could  not  establish  for  want  of  means  to  cover  the  ex- 
penses attending  them.  (Wealth  of  Nations,  V,  ch.  i,  2.)  Hence  he  de- 
mands (III,  ch.  2)  the  abolition  of  all  kinds  of  fdci  commissa,  of  royalty  in 
mines  (I,  ch.  11,  2),  of  all  corporate  and  exclusive  privileges,  of  all  protective 
duties  etc.  (IV,  ch.  i  ft"),  but  especially  of  the  colonial  policy  hitherto  in 
vogue.    (IV,  ch.  8.) 

The  attacks  of  the  Socialists  on  freedom  of  competition  were  begun  by 
FicJitc,  Geschlossener  Handelsstaat,  126,  in  which  it  is  called  a  robber-sj'stem 
or  system  of  spoliation.  He  would  have  the  state  have  more  solicitude  for 
human  industry  than  if  men  were  so  many  swallows.  See  further,  Sisinoiidi, 
N.  Principes,  passim,  who  everywhere  demands  the  protection  of  the  gov- 
ernment for  the  weaker.  Fourier,  N.  Monde  industriel,  396,  who  thinks  that 
Ic  moHofole  gdndral  is  always  a  freservatif  contrc  Ic  commerce.  Bastiat,  Har- 
monies economiques,  ch.  10,  has  a  very  valuable  refutation  of  these  follies. 
Recently,  Rodbertus,  Hildebrand's  Jahrbiicher,  1S65,  II,  272,  is  of  opinion 
that  "  social  individualism  "  has  ever  had  in  history  the  task  of  dissolving 
decaying  societies,  as,  for  instance,  under  the  Csesars. 

'  Whoever  would  sell  to  others  must  purchase  of  them.  (Child.,  Discourse 
of  Trade,  358.)  Similarly  Temple,  Wovks  III,  19,  and  Bccher,  Polit.  Discurs, 
1547.  This  view  seems  to  have  become  the  national  one  first  in  Holland. 
Compare  also  ^esnay,  71  and  Mirabcau,  Philosophic  rurale,  1763,  ch.  2. 

*  We  often  hear  it  said:  "  nothing  sells  because  there  is  no  money."  But 
the  real  cause  here  is,  in  most  instances,  not  a  want  of  money,  but  a  Avant  of 
other  goods  which  might  serve  as  a  counter-value.  In  bad  times,  for  in- 
stance, there  is  many  a  weaver  who  would  consider  himself  fortunate,  even 
if  he  could  get  no  money  for  his  cloth,  to  obtain  instead,  meat,  bread,  wood, 


298  CIRCULATION  OF  GOODS.  [B.  II,  Cii.  I. 

ter  adapted  to  satisfy  wants,  production  is,  the  more  readily 
does  any  product  find  a  remunerative  market;  more  readily  in 
England,  for  instance,  in  spite,  or  rather,  because  of,  the  great 
competition  there,  than  in  Greenland  or  Madagascar.  From 
this  it  follows  that,  as  a  rule,  a  person  is  in  a  better  condition 
to  purchase  more  goods  in  proportion  as  he  has  produced 
more  himself.  According  to  official  accounts,  the  average 
value  of  a  harvest  of  wheat  and  potatoes  in  Prussia  was  for- 
merly 332,500,000  thalers.  In  the  year  1850,  however,  it  was 
only  262,000,000  thalers.  As  a  matter  of  course,  the  country 
people  in  that  year  could  not  purchase  from  the  cities  as  much 
as  in  ordinary  years,  by  a  diflference  of  70,000,000  thalers. 
This  illustrates  how  every  class  of  people,  who  live  by  finding 
a  free  market  for  their  products,  are  interested  in  the  prosper- 
ity of  all  other  classes.  As  Bastiat  says:  "  All  legitimate  in- 
terests are  harmonious."  The  more  flourishing  a  city,  the 
better  olT  are  the  towns  around  it,  which  furnish  it  with  pro- 
visions; and  the  richer  these  towns,  the  more  flourishing  is 
the  industry  of  the  city  which  ministers  to  their  wants.^  It  is 
important  that  this  fact  should  be  borne  steadily  in  mind, 
especially  in  times  of  advanced  civilization,  when  the  feeling 
that  we  all  have  interests  in  common,  is  too  apt  to  grow  dor- 
mant. Nothing  can  better  serve  to  awaken  it  again  when  it 
has  become  so.  A  nation,  sa37s  Louis  Blanc,  in  which  one  por- 
tion of  the  people  is  oppressed  by  another,  is  like  a  man 

raw  material  etc.  If  money  only  were  wanting,  that  might  easily  be  as  fa- 
vorable a  symptom  in  commerce,  as  Avhen  there  are  not  enough  shops, 
steamers  etc.,  to  carry  on  the  business  of  the  country.  Compare  Nortli.^  Dis- 
courses upon  Trade,  1691,  11  seq.,  but  especially  J.  B.  Safs  celebrated  theory 
of  Markets,  traitd  I,  ch.  XV. 

3  See  Humholdf  s  observations  as  to  how,  in  Spanish  America,  agriculture 
in  the  vicinity  of  the  mines  increases  and  decreases  with  the  wealth  of  the 
latter.  (N.  Espagne,  III,  11  ff.)  See  also  Harriiigton  (ob.  1677),  On  the  Pre- 
rogative of  a  Popular  Government,  I,  ch.  11;  Cantillon^  Nature  du  Com- 
merce, 16.  And  so  ^^e/w.,  Lehrbuch,  122  seq.,  points  out  how  great  enter- 
prises produce  especially  for  the  consumption  of  the  small  householder  with- 
out capital,  and  how,  therefore,  the  flourishing  condition  of  the  one  deter- 
mines that  of  the  other. 


Sec.  XCIX.]  FREEDOM  OF  COMPETITION.  299 

wounded  in  the  leg.     The  healthy  limb  is  prevented  by  the 
sick  one  from  performing  its  functions.* 


SECTION  XCIX. 

FREEDOM  OF  COMPETITION  AND  INTERNATIONAL  TRADE. 

Does  the  same  rule  apply  to  the  commercial  intercourse  of 
nations?  Where  the  feelinfj  that  all  mankind  constitute  one 
vast  family  is  stronger  than  that  of  their  political  and  religious 
diversity;  where  the  sense  of  right  and  the  love  of  peace  have 
extinguished  every  dangerous  spark  of  ambition  for  empire 
and  all  warlike  jealousy;  where,  especially,  their  economic 
interests  are  rightly  understood  on  both  sides,  a  real  conflict 
between  the  interests  of  two  nations  must  always  be  a  phe- 
nomenon of  rare  occurrence,  and  an  exception  to  the  general 
rule,  which  should  not  be  admitted  until  it  has  been  clearly 
demonstrated  to  exist.'^     Highly  cultivated  nations  generally 

*  Those  indeed  who  Uve  by  the  spohation  of  others,  as  robbers,  deceivers 
etc.  are  interested  in  the  economic  prosperity  of  the  latter  only  so  long  as 
their  spoliation  of  them  is  not  endangered.  Only  to  this  extent  can  it  be 
claimed  with  I^r.  List  that  the  nobility  of  the  Middle  Ages,  in  obeying  the 
selfish  calculation  which  led  to  the  oppression  of  the  peasantry,  engaged  in 
as  bad  a  speculation  as  a  manufacturer  of  our  day  would  who  should  feed 
his  steam-engine  with  nothing  but  saw-dust  or  scraps  of  old  paper.  The 
cities  of  the  middle  ages  had  a  much  more  undoubted  economic  interest  in 
the  emancipation  of  the  peasantry  as  a  class  than  the  nobles  or  the  clergy. 

'  Such  exceptions  there  certainly  are,  even  if  it  were  not  true  "  that  the 
most  godly  cannot  rest  in  peace  unless  he  is  acceptable  to  his  ungodly  neigh- 
bor." Nations  that  furnish  the  same  products  as  we  do  may,  indeed,  "  spoil 
our  market,"  just  as  at  home  the  selfish  shoemaker  may  desire  the  prosperity 
of  all  wearers  of  shoes,  that  is  of  all  other  industries,  but  not  that  of  all 
other  producers  of  shoes.  The  view  that  long  prevailed,  that  one  man's  gain 
was  always  some  other  man's  loss  {Th.  Moms.,  Utopia  79,  ed.  Colon.  1555; 
Baco.,  Sermones  ndeles,  cap.  15;  quid-quid  alicubi  adiiciiur,  alibi  detrahiturj 
M.  Montaigne,  Essais  I,  21:  les  froujicit  de  Vun  est  le  dommage  de  Vautye) 
prevailed  much  longer  in  international  affairs  where  observation  is  much  more 
difficult  than  in  national  affairs ;  although  even  here,  P.  de  la  Court,  Maximes 
politiques,  1658,  contrasts  the  economic  interest  of  Holland  with  that  of  the 
rest  of  the  Netherlands  and  prefers  it  to  theirs.     Even  Voltaire-  says :  "  The 


300  CIRCULATION  OF  GOODS.  [B.  II,  Ch  I. 

look  upon  the  first  steps  in  the  civilization  of  a  foreign  people 
with  a  more  favorable  eye  than  they  do  on  the  subsequent 
progress  which  brings  such  nations  nearer  to  themselves.^ 
•  Yet  the  realization  of  the  above  mentioned  conditions  on  all 
sides  is  something  so  improbable,  unpatriotic  "philanthropy" 
something  so   suspicious,*  the  greater  number    of   mankind 

desire  of  the  greatness  of  the  Fatherland  includes  the  desire  of  evil  to  our 
neighbor.  Evidently  no  country  can  gain  except  what  another  loses."  (Diet, 
philosophique,  v.  Patrie.)  Compare,  however,  the  feid-etre  in  his  Histoire 
de  la  Russie,!,  i,  on  the  occasion  of  the  English-Russian  treaty  of  commerce. 
Similarly,  Galiani,  Delia  Moneta,  I,  i,  IV,  i ;  Verri,  Opuscoli,  335,  and  re- 
cently V.  Cancrin  who  says  that  "  in  every-day  life,  property  is  acquired  only 
at  some  other  person's  expense."  (Weltreichthum,  1S21,  119.  Ookonomie  der 
menschl.  Gesellschaft,  1S45,  23.)  The  cosmopolitan  view  {Xcnoph.,  Cyrop., 
Ill,  2,  17.  Hier.,  10)  which  prevails  in  Adam  Smith's  school  was  introduced 
by  Hume^  Essays,i752,  On  the  Jealousy  of  Trade,  ^uesnay,  Encyclopedie,  v. 
Grains,  294,  ed.  Daire;  A.  Smith,  Theory  of  moral  Sentiments,  1759,  p.  6,  sec. 
2,  ch.  2.  Pinto,  Lettre  sur  la  Jalousie  de  Commerce,  1771,  and  jf.  Tucker,  Four 
Tracts  on  commercial  and  political  Subjects,  1776,  34  ft"  and  42  IT.  "  The 
system  of  states  exercises  no  influence  whatever  on  the  world's  com- 
merce." (Lotz,  HandbuchI,  11.)  More  recently,  R.  Cobden,  in  his  Russia, 
Edinb.,  1S36,  among  others  argued,  that  the  conquest  of  Turkey  by  the  Rus- 
sians would  be  useful  to  England,  because  then  more  (.?)  English  products 
would  probably  be  sold  there.  Russia  would  become  no  stronger  thereby,  as 
conquests  always  injure  the  conqueror  more  than  they  benefit  him.  The 
idea  of  European  equilibrium  is  therefore  a  chimera,  because  no  state  can 
be  prevented  from  having  an  internal  growth,  as  great  as  may  be.  Thus,  in 
the  summer  of  1S53,  "^^e  heard  the  London  Times  sometimes  preach  tliat 
every  cannon-shot  fired  by  the  English  at  the  Russians  might  kill  an  English 
debtor  or  an  English  customer.  The  Venetians  entertained  a  similar  view 
at  the  beginning  of  the  fifteenth  century.  Compare  AI.  Sanudo  in  Muratori, 
Scriptores,  XXII,  950  ft'.     See  above,  §  12. 

Moreover,  Malthus  had  recognized  that  there  were  natural  rivalries  be- 
tween nations  which  produced  exceptions  to  Tucker's  laws.  (Principles, 
Preface.)     Similarly  Garve,  in  Cicero's  Pflichten  (17S3),  III,  146  ft". 

'^  B.  Franklin,  Works,  vol.  Ill,  49.  Sisnwndi  claims  for  all  civilized  nations 
the  right  of  interfering  with  the  governments  of  other  nations  with  whom 
they  have  or  might  have  commercial  relations,  and  of  insisting  that  they 
shall  have  a  good  government  under  which  commerce  may  freely  develop. 
(N.  P.  VII,  ch.  4.) 

^  As  for  instance  when  the  ami  des  honunes  says  that  he  felt  towards  an  En- 
glishman or  a  German  as  he  did  towards  a  Frenchman  with  whom  he  was 
not  acquainted.     Mirabeau,  Philosophic  rurale,  ch.  6.. 


Sec.  XCIX.]  FREEDOM  OF  COMPETITION.  301 

SO  incapable  of  development  except  under  the  limitations  of 
nationality,  that  I  should  observe  the  total  disappearance  of 
national  jealousies  only  with  solicitude.  Nothing  so  much 
contributed  to  the  Macedonian  and  Roman  conquests  as  the 
cosmopolitanism  of  the  later  Greek  philosophers.'* 

As  all  commerce  is  based  on  the  mutual  dependence  of  the 
contracting  parties,  we  need  not  be  surprised  to  find  interna- 
tional commerce  so  dependent.  But  this  dependence  need 
not,  by  any  means,  be  equally  great  on  both  sides.  Rather 
is  the  individual  or  the  nation  which  stands  in  most  urgent 
need  of  foreign  goods  or  products  the  most  dependent.  Hence, 
it  seems  that,  in  the  commercial  intercourse  between  an  agri- 
cultural and  an  industrial  people,  in  which  the  former  furnish 
food  and  the  raw  material  of  manufactures,  and  the  latter 
manufactured  articles,  the  latter  are  the  more  dependent.  In 
case  of  war,  for  instance,  it  is  much  easier  to  dispense  for  a 
long  time  with  manufactured  articles  than  with  most  articles 
of  food.^  However,  this  condition  of  things  is  very  much 
modified,  for  the  better,  by  all  those  circumstances  on  which 
the  dominant  active  commerce  of  a  nation  depends.  It  is,  for 
instance,  much  easier  for  the  English,  on  account  of  their 
greater  familiarity  with,  and  knowledge  of  the  laws  and  nature 
of  commerce,  on  account  of  their  business  connections,  their 
capital,  credit  and  means  of  transportation,  but  more  particu- 
larly on  account  of  the  greater  capacity  of  circulation  of  their 
national  resources,  to  find  a  new  market  in  the  stead  of  one 
that  has  been  closed  to  them,  than  it  is  for  the  Russians  with 
their  much  more  immoveable  system  of  public  economy.®     It 

"•Thus,  for  instance,  the  Stoic,  Zeno:  Plutarch.  De  Alex,  fort,  i,  6. 

^  Compare  even  Lauderdale,  Inquiry,  274  if. 

^  How  well,  for  instance,  the  English  sustained  Napoleon's  continental 
blockade,  the  evils  produced  by  which  were  intensified  by  several  bad  har- 
vests. Its  worst  time  did  not,  indeed,  coincide  with  that  of  the  struggle  with 
the  United  States.  The  ancient  Athenians,  during  their  contest  with  Philip 
of  Macedon,  considered  the  question  of  the  supplies  from  the  Bosphorus 
etc.  as  one  of  life  and  death.  But  this  can  be  looked  iipon  only  as  a  cogent 
proof  of  the  small  development  which  their  commercial  talents  had  received 


302  CIRCULATION  OF  GOODS.  "     [B.  II,  Ch.  I. 

is  true,  however,  that  an  effective  blockade,  which  excluded 
both  of  these  nations  from  all  the  markets  of  the  world,  would 
be  much  more  injurious  to  England  than  to  Russia. 

at  the  time.  How  easily  might  they  not,  according  to  our  ideas,  have  ob- 
tained corn  from  Sicily  or  Egypt, 


Sec.  C]  prices  IN  GENERAL.  303 

CHAPTER  II. 

PRICES. 


SECTION  C. 

PRICES   IN  GENERAL. 

The  price  of  a  commodity  is  its  value  in  exchange  expressed 
in  the  quantum  of  some  other  definite  commodity,  against  which 
it  is  exchanged  or  to  be  exchanged.  Hence,  it  is  possible  for 
any  commodity  to  have  as  many  different  prices  as  there  are 
other  kinds  of  commodities  with  which  it  may  be  compared.^ 
But  whenever  price  is  spoken  of,  we  think  only  of  a  compar- 
ison of  the  commodity  whose  value  is  to  be  estimated,  with  the 
commodity  which,  at  that  time  and  place,  is  most  current  and 
has  the  greatest  capacity  for  circulation.  (Money.)  ^  When 
two  commodities  have  changed  their  price-relation  to  each 
other,  it  is  not  possible,  from  the  simple  fact  of  such  change 
of  relation,  to  determine  on  which  side  the  change  has  taken 
place.  If  we  find  that  a  commodity  A  stands  to  all  other 
commodities,  C,  D,  E  etc.,  in  the  same  relation  as  to  price  as 

1  According  to  the  acute  analysis  of  language  made  by  F.  y.  Neumann, 
Tiibinger  Ztschr.,  1872,  317  fF.,  the  word  "price"  has  reference  to  an  actual 
purchase  or  sale,  "while  the  expression  "  value  in  exchange,"  generally  called 
simply  value,  is  based  upon  a  valuation,  or  intimates  in  a  general  way  that  an 
object  possesses  value;  value  in  exchange  is,  so  to  speak,  the  average  of  sev- 
eral price-determinations.  Price,  according  to  Schdfflc,  is  the  external  con- 
sequence of  value  in  exchange,  a  means  of  representing  the  latter.  (N.  CZk., 
Ill,  Aufl.,  I,  218.)  Only  through  the  difference  between  value  in  exchange 
(universal  possibility)  and  price  (special  reality)  is  the  laesio  enormis  of  the 
jurists  possible.     (Schmitthenner,  Staatswissenschen,  I,  416.) 

■■^  By  market  price,  prix  courant,  is  meant  the  money-price  of  commodities, 
determined  by  competition. 


304  CIRCULATION  OF  GOODS.  [B.  II,  Ch.II. 

before,  while  commodity  B,  compared  with  the  same,  has 
changed  its  place  in  the  scale  of  prices,  we  may  infer  that 
B,  and  not  A,  has  left  its  former  position.^ 

The  words  costly  and  dear,  as  contradistinguished  from 
common  and  cheap,  both  indicate  a  high  price.  We,  how- 
ever, call  a  commodity  costly  whose  price,  compared  with 
that  of  other  similar  commodities,  is  high.  On  the  other 
hand,  we  call  a  commodity  dear  when  we  compare  it  with 
itself,  and  with  its  own  average  price  in  other  places  and  at 
other  times.^ 

In  individual  cases,  the  price  of  a  commodity  is  determined 
most  usually,  and  at  the  same  time  most  superficially,  by  cus- 
tom; people  ask  and  pay  for  a  commodity  what  others  have 
asked  and  paid  for  it.  If  we  go  deeper  and  inquire  what 
originated  this  customary  price  and  may  continually  change 
it,  we  come  to  the  struggle  of  interests  between  buyers  and 
sellers.  And  if  science  would  analyze  the  ultimate  elements 
of  the  incentives  to  this  struggle  and  the  forces  engaged  in  it, 
it  is  necessary  that  it  should  keep  in  view  the  entire  economy 
of  the  nation,  and  even  all  national  life. 

SECTION  CI. 

EFFECT  OF  THE  STRUGGLE   OF  OPPOSING  INTERESTS  ON 

PRICE. 

No  where  in  the  public  economy  of  a  people  are  the  work- 
ings of  self-interest  so  apparent  as  in  the  determination  of 
prices.  When  the  price  of  a  commodity  is  once  fixed  by  the 
conflict  of  opposing  interests,^  the  self-seeking  of  every  indi- 
vidual dictates  that  he  should  thereby  gain  as  much  as  possible 

^  A  problem  very  similar  to  that  of  the  motion  of  bodies  in  space. 

4  Lofz,  Handbuch,  50  ff.,  calls  those  commodities  costly  which  are  obtained 
only  at  a  high  cost  of  production,  and  dear,  those  whose  price  is  above  the 
cost  of  production. 

*  Compare  Canard,  Principes  d'Economie  politique,  ch.  3.  Almost  simul- 
taneously, H.  Thornton,  1802,  Paper-Credit  of  Great  Britain. 


Sec.  CI.]  OPPOSING  INTERESTS  ON  PRICE.  305 

of  the  goods  of  others,  and  lose  as  little  as  possible  of  his  own. 
In  this  struggle,  the  victory  is  generally  to  the  stronger,  and 
the  price  is  higher  or  lower,  according  to  the  superiority  of 
the  buyer  or  seller."  But  \vho,  in  such  case,  is  the  stronger? 
Political  or  physical  superiority  can  turn  the  balance  one  way 
or  another  only  in  veiy  barbarous  times,  and  especially  in 
times  when  legal  security  is  small.''  As  a  rule,  it  is  the  party 
in  whom  the  desire  of  holding  on  to  his  own  commodities  is 
strongest,  and  who  is  least  moved  by  the  want  of  the  wares 
of  others.  As  in  every  conflict,  confidence  in  self,  sometimes 
even  unbounded  confidence  in  self,  is  an  important  element  of 
success.  A  party  to  a  contract  of  sale  or  barter,  who  con- 
siders his  immediate  position  decidedly  stronger  than  that  of 
the  other  party,  will  scarcely  depart  from  his  demands.  Hence 
it  is,  that  in  exchange,  one  party  so  frequently  holds  back 
until  the  other  has  expressed  his  terms.'*     How  different  is  the 

*  See  yacksoii's  Account  of  Morocco,  2S4,  for  cases  in  which,  in  the  Sahara, 
when  the  burning  -winds  of  the  desert  had  dried  up  the  water  in  the  leathern 
bottles  of  the  caravan,  a  drink  of  water  cost  from  $10  to  $500. 

^  The  North  American  aborigines  very  frequently  consent,  in  their  ex- 
changes, to  take  any  offer  made  to  them  by  their  equals,  however  insufBcient 
it  may  be,  because  they  fear  revenge.  ScJioolcraJt,  Information  etc.,  II,  17S. 
As  to  the  efiects  of  cunning,  the  Tungusi,  when  they  get  a  glass  of  brandy 
from  the  Russians,  grow  almost  idiotic,  and  give  away  their  goods  at  mock- 
prices  in  drink,  (v.  Wrangell,  Nachrichten,  I,  233.)  In  the  higher  stages 
of  civilization,  on  the  other  hand,  very  distinguished  people  are,  by  no 
means,  privileged  because  of  their  position,  in  the  struggle  for  prices.  In 
modern  times,  claims  (reclamen)  have  taken  the  place  of  greater  physical  or 
political  power.  Compare  E.  Hcrmaini,  Leitfaden  der  Wirthschaftslehre 
1S70,  91  ff. 

^  Thus  Galiani  says,  that  before  one  of  the  two  parties  has  expressed  his 
want  to  buy  or  to  sell,  the  pans  of  the  scales  are  in  equilibrium.  The  first 
that  speaks  breathes  on  one  of  them,  and  it  drops.  (Dialogue  sur  le  Com- 
merce des  Bleds,  1770,  No.  6.)  This  has  been  verified  in  a  striking  manner 
in  California,  where  the  most  valuable  commodities  were  often  purchased  at 
auction  at  the  lowest  prices,  while  when  purchased  from  merchants  and 
even  the  most  wretched  shopkeepers,  they  were  sold  enormously  dear. 
(Gcrstackcr,  in  the  Allg.  Zeitg.,  May,  1850.)  Thus  there  wtre  harvested  in 
France,  in  1817,48,000,000  hectolires  of  wheat,  valued  at  2,046,000,000  francs, 
m  1820,  44,500,000  hectolitres  valued  at  895,000,000  francs.  (Conlier.)  This 
Vol.  I. — 2Q 


306  CIRCULATION  OF  GOODS.  [B.  II,  Ch.  II. 

price  of  the  same  pieces  of  land  which  a  new  raih-oad  enter- 
prise is  compelled  to  pay  and  the  prices  it  would  get  for  them, 
from  the  adjoining  owners,  in  case  of  the  dissolution  of  the 
company. 

But  the  struggle  to  raise  prices  or  to  lower  them,  which  is 
always  going  on,  undergoes  modifications  of  every  description 
among  all  really  commercial  nations,  partly  through  the  in- 
fluence of  the  public  conscience,  which  brands  as  inhuman 
and  blameworthy  the  spoliation  of  the  opposing  party  by  acts 
which  the  laws  do  not  reach.  And  this  consideration  by  the 
public  conscience  is  all  the  more  severe  in  proportion  as  real 
competition  in  the  article  sold  is  w^anting.^  But  the  chief  mod- 
ification in  this  struggle  is  produced  by  the  fact,  that  where 
civilization  has  advanced  farthest,  every  commodity  is  offered 
for  sale  by  a  great  many  and  wanted  by  a  great  many.^  As 
soon  as  several  seek  the  same  object,  there  naturally  results  a 
rivalry  among  them,  which  induces  each  to  attain  the  desired 
end,  even  by  the  making  of  greater  sacrifices  than  others. 

vast  difference  in  price  existed,  because  in  iSi 7,  the  whole  world  was  still 
trembling  under  the  impression  made  by  the  failure  of  the  crops  in  1S16, 
while  in  1820,  the  feeling  of  comfort  and  security  caused  by  the  rich  year 
1819,  siill  prevailed.  Low  prices  at  forced  sales  under  decree  etc.  See  be- 
low, §  5.  That  travelers  are  so  frequently  taken  advantage  of  in  effecting 
changes  of  money  is  explainable  partly  by  their  urgent  wants,  which  are  well 
known  to  the  opposite  party,  and  partly  by  their  supposed  ignorance  in  the 
matter.  And  so,  at  auction  sales,  out-bidding  one  another  has  something 
very  seductive  in  it  for  ignorant  or  hot-headed  purchasers. 

'  It  was  considered  immoral  by  his  contemporaries,  when  William  the  Con- 
queror introduced  the  custom  of  farm-letting  to  the  highest  bidder.  (A. 
Thierry^  ConquSte  de  I'Angleterre,  II,  116,  ed.  Bruxelles.)  It  is  repugnant 
to  poetic  and  delicate  minds  to  think  that  everything  has  a  price  exactly 
fixed.  (§2.)  I  need  only  refer  to  the  picture  of  Helen  which  Zeuxis 
exhibited  for  money,  which  act  of  his  Avas  characterized,  by  his  cotempora- 
ries,  as  a  species  of  prostitution.  Val.  Mac,  III,  7.  yEltan,  V,  4,  IV,  12. 
Socrates  judgment  on  the  payment  of  the  sophists.  Xenoph.,  Memor.,  I, 
6,  13- 

*  Competition  has  only  a  negative  influence  on  prices,  inasmuch  as  it  mod- 
ifies the  extreme  operation  of  the  other  grounds  of  their  determination. 
Thornton,  Paper  Credit.     Lotz,  Revision,  181 1,  I,  74  fl",  241  ff. 


\ 


Sec.  CI.]  OPPOSING  INTERESTS  ON  PRICE.  307 

The  greater  the  supply  of  a  commodity  is,  as  compared  with 
the  demand  for  it,  the  lower  is  its  price;  the  greater  the  de- 
mand as  compared  with  the  supply,  the  higher  it  is.  And, 
indeed,  there  is  question  here,  not  only  of  the  mass  of  things 
supplied  or  demanded,  but  also  of  the  intensity  of  the  supply 
and  demand.''^ 

If  the  exchange-force  of  both  contractants  be  equal,  or,  in 
other  words,  if  both,  with  equal  knowledge,  are  interested  in 
the  completion  of  the  exchange,  there  results  from  this  atti- 
tude of  the  parties  toward  each  other,  what  is  called  an  equit- 
able, or  average  price,  in  which  both  meet  with  their  deserts. 
Here  each  is  a  gainer,  since  each  has  parted  with  the  com- 
modity which  was  less  necessary  to  him,  and  received  in 
exchange  the  commodity  which  was  more  necessary  to  him. 
Looked  at,  however,  from  the  stand-point,  not  simply  of  a 
nation's  but  of  the  world's  economy,  the  value  given  and  the 
value  received  are  equal.  ^  ^ 

■"The  expression,  "  intensity  of  demand,"  in  Malthus^  Principles,  ch.  2,  sec.  2. 
As  early  a  writer  as  Sir  J.  Ste-ivart  calls  attention  to  the  difference  between 
large  and  high  and  small  and  low  demand.  A  high  demand  will  always 
raise  the  price,  as  when,  for  instance,  tAvo  wealthy  virtuosi  compete  at  an 
auction.  Paucorum  furore  frctiosa^^%  Seneca  says.  An  English  penny  of  the 
time  of  Henry  VII,  once  sold,  on  such  an  occasion,  for  £600.  In  1868,  at  the 
Lafitte  auction,  seven  bottles  of  wine  sold  to  Rothschild  at  235  francs  a  piece 
after  the  Maison  dorde  had  offered  233.  (N.  freie  Presse,  Dec.  17,  1868.)  A 
great  demand  has  frequently  no  result  but  to  increase  the  supply,  and  the 
price  rises  only  in  so  far  as  the  demand  is  too  sudden  to  permit  a  parallel 
growth  of  the  supply.  (Principles,  Book  II,  ch.  2,  10.)  The  present  price 
of  tea  could  not  remain  unaffected,  if  ten  different  private  merchants,  com- 
peting one  with  another,  or  the  agent  of  a  privileged  commercial  society, 
should  send  orders  to  China  for  an  eqvial  quantity  of  tea.  (  Verri,  Medita- 
zioni,  IV,  8  ff.) 

8  Immense  weight  laid  on  the  cequalitas  fermutaiioiiis  (after  Aristot.,  Eth. 
Nicom.,  V.  7,)  in  the  ethics  and  economics  of  the  scholastic  middle  ages, 
and  in  the  time  of  the  Reformation.  Compare  Melancthon^  in  Corp.  Ref , 
XVI,  495  ff,  XXII,  230. 

'  A  very  barbarous  theory  of  price  in  Xcnoj>Ii.,  De  Vectigg.,  4.  The  an- 
cients made  little  progress  in  this  respect,  although  there  are  not  wanting  in- 
genious observations  on  certain  phenomena  of  prices.      (See  Art'sfoi.,  (?) 


308  CIRCULATION  OF  GOODS.  [B.  II,  Cn.  II. 

As  a  rule,  the  price-relation  of  two  commodities  is  deter- 
mined by  this  relation  of  demand  and  supply,  —  by  the  desire 
to  possess  and  the  difficult}'  of  obtaining  them.  We  must, 
therefore,  examine  on  what  deeper  relations  supply  and  de- 
mand themselves  depend.^"    In  the  case  of  the  purchaser,  the 

Oecon.  II;  Cicero,  De  Oft".  Ill,  12  ft'.)  Mariana,  De  Rege  et  Regis  Institu- 
tione,  1598,  III,  explains  price  as  the  relation  of  value  to  quantity.  Accord- 
ing to  Locke,  the  price  of  a  thing  is  determined  by  the  relation  between 
"quantity"  and  "vent":  the  increase  or  diminution  of  its  useful  qualities  in- 
fluences it  only  so  far  as  it  alters  that  relation.  (Considerations  on  the  Con- 
sequences of  the  Lowering  of  Interest  etc,  1691,  Works  II,  20  ft".)  Law,  on 
the  contrary,  says  that  the  "vent"  can  never  be  greater  than  the  "quantity," 
but  that  the  "  demand  "  may  be.  Wherefore,  he  proposes  the  formula :  quan- 
tity in  proportion  to  the  demand.  (Trade  and  Commerce  considered,  1705, 
ch.  I.)  In  chap.  6,  La-v  distinguishes  three  elements  in  price:  quality,  quan- 
tity and  demand.  The  expression  "  quantity  "  is,  eertainly,  very  unsatisfac- 
tory. How  many  examples  does  not  Tooke  (Thoughts  and  Details  on  the 
high  and  low  Prices  of  the  last  thirty  Years,  1823,  part  IV)  give  to  illus- 
trate how,  when  the  supply  was  smallest,  prices  were  lowest  and  vice  versa! 
It  was  so  almost  always  after  the  market  was  over-filled,  when  a  great  many 
speculators  had  lost  and  no  one  dared  to  purchase  anew.  Montanari  (ob. 
1687)  furnishes  us  with  an  excellent  theory  of  prices.  (Delia  Moneta,  64  fF., 
Custodi.)  And  a  still  better  one,  Sam.  Pufendorf,  Jus  Nature  et  Gentium, 
1672,  V.  I,  who  must  be  considered  the  best  authority  on  the  laws  of  prices 
before  Ste-vart.  Boisguillebert,  Traite  des  Grains,  II,  i,  10.  Galtatii,  Delia 
Moneta,  I,  2,  knows  only  the  factors  utilitd,  and  raritci,  although  in  his  expo- 
sition of  the  latter,  he  discusses  many  points  which  would  be  called  the  cost 
of  i^roduction  in  our  time.  The  wisdom  of  Providence  has  granted  us  the 
most  iiseful  things  in  the  greatest  abundance  to  make  them  cheap.  Stetvart, 
Principles  II,  2,  4,  rendered  a  great  service  to  the  theory  of  prices,  tracing 
back  supply  to  the  cost  of  production,  demand  to  want  and  ability  to  pay ; 
and  his  deserves  to  be  called  the  immediate  predecessor  of  Hcrmami's  re- 
markable theory.  (Herniatm,  Staatsw.  Untersuchungen,  66  ft'.)  For  a  pe- 
culiar theory  of  prices,  see  Paganini,  Saggio  sopra  il  giusto  Pregio  delle 
Cose,  189  ft*  Neri,  Osservazioni,  1751,  127.  Gust.  Menger,  Grundsatze,  I, 
179  fF.,  has  made  an  interesting  attempt  to  explain  the  formation  of  prices 
in  its  simplest  shape,  in  the  supposition  of  a  monopoly  in  the  seller,  and  by 
then  going  over  to  the  subsequent  modifications  introduced  by  the  competi- 
tion of  many  sellers. 

"  "  Instead  of  sejiarating,  in  the  same  matter,  the  points  of  view  of  the 
buyer  and  seller,  we  may  distinguish  the  consideration  of  the  thing  to  be 
acquired  and  the  thing  to  be  given  by  one  and  the  same  person."     (Ran.) 


Sec.  CII.]  DEMAND.  309 

value  in  use  of  the  commodit}-  and  his  own  ability  to  pay  con- 
stitute the  maximum  limit  of  its  price,  which  price  may,  how- 
ever, be  modified  by  the  cost  of  producing  it^^  elsewhere  or  at 
another  time.  In  the  case  of  the  seller,  the  cost  of  produc- 
tion is  the  minimum  limit,  which  may,  however,  be  extended 
by  the  cost  of  procuring  the  commodity  by  the  pmxhaser  at 
another  time  or  place.^^ 

SECTION  CII. 

DEMAND. 

The  pmxhaser  in  his  demand  is  wont  to  consider  principal- 
ly the  value  in  use  of  a  commodit}-,  according  as  it,  in  a  higher 
or  lower  degree,  ministers  to  a  necessary  want,  to  a  decency 
or  to  a  luxury.  The  difference  of  opinion  as  to  which  of 
these  categories  any  given  want  belongs  depends  not  only  on 
the  nature  of  the  country  and  the  customs  of  its  people,  but, 
for  the  most  part,  also,  on  the  prejudices  of  class  and  on  per- 
sonal individuality.^     A  reasonable  man  will  employ  only  the 

The  possessor  of  the  more  cun-ent  commodity  appears  especially  as  demand- 
ing, that  of  the  less  current  as  offering  or  supplying,     (v.  Mangoldt.) 

"  This  is  for  free  goods=0,  for  monopolized  goods=l-. 

''^  The  obvious  fact  that  every  price  supposes  a  comparison  of  two  com- 
modities, and  that  every  buyer  is,  at  the  same  time,  a  seller,  has  been  over- 
looked by  only  too  many  writers.  And  hence  Dutofs  opinion,  that,  as  all 
men  buy  and  few  only  sell,  the  state,  in  case  of  doubt,  should  favor  the  buyer. 
(Reflexions  sur  le  Commerce  et  les  Finances,  1738,  962,  dd.  Daire.)  And  so 
the  often-mooted  question  whether  imiversal  dearness  or  cheapness  is  more 
useful :  the  latter  advocated,  for  instance,  by  Herbert^  Police  gendrale  des 
Grains,  1755;  Verri,  Meditazioni,  V;  the  former  by  BmsgiiUlebert.,  Traitd 
des  Grains,  I,  7,11,  9;  and  by  the  Physiocrates.  (^/ccs/tay,  ISIaximes  gdndrales, 
Nr.  iS  ff.,  I,  Probleme  &onomique;  also  by  ..-I.  2'auiig,  Polit.  Arithmetics, 
ch.  8.)  The  laity  in  Political  Economy  understand  by  dearness  only  the  gen- 
eral cheapness  of  the  medium  of  circulation  or  exchange,  and  vice  versa. 

'  Thus,  even  a  poor  man  in  Naples  sometimes  requires  a  glass  of  ice-water. 
The  introduction  of  the  extensive  use  of  snow  into  Sicily  improved  the  con- 
dition of  the  public  health.  (Rehfiies,  Gemiilde  von  Neapel,  I,  37fF.)  On  the 
other  hand,  furs,  in  the  far  north,  are  articles  of  prime  necessity.  Newspapers 
in  a  free  country  sastisfy  a  want  much  more  urgent  than  in  countries  which 


310  CIRCULATION  OF  GOODS.  [B.  II,  Ch.  IL 

surplus  of  the  first  cla'ss  in  the  satisfaction  of  wants  of  the 
second,  and  again  only  the  surplus  of  the  second  in  the  satis- 
faction of  wants  of  the  third.- 

If  the  value  in  use  of  a  commodity  rises  or  falls,  and  sur- 
rounding circumstances  remain  unchanged,  its  price  also  rises 
or  falls.2  ^ 

are  not  free.  And  so,  Senior  says  that  shoes  are  "  necessaries  "  to  all  Eng- 
lishmen, since  without  them,  their  health  would  suffer.  To  the  lower  classes 
of  Scotland  they  are  "  luxuries."  Custom  permits  them  to  go  barefoot  with- 
out hardship  or  degradation.  For  the  middle  classes  of  the  same  countiy, 
they  are  "  decencies."  Shoes  are  worn  there,  not  to  protect  the  feet  but  one's 
civil  position.  In  Turkey,  tobacco  is  a  decency  and  wine  a  luxui-y.  The  re- 
verse is  the  case  in  England.     (Outlines,  36  ff.) 

^  As  to  the  relativity  of  the  opposites  of  "  temperance  "  and  "  excess,"  every 
person  should  attend  to  the  following  points :  a,  not  to  exceed  one's  income ; 
b,  to  provide  for  one's  self  and  one's  family ;  c,  to  lay  by  something  for  a 
rainy  day;  d,  to  place  one's  self  in  a  position  to  care  for  the  poor;  e,  to  in- 
dulge in  no  pleasure  injurious  to  body  or  mind;  f,  to  give  no  bad  example. 
(Tucker,  Two  Sermons,  29  if.)  Mcngcr,  Grundsatze,  I,  92  ff.,  endeavors  to 
compare  the  value  in  use  of  difterent  commodities  from  the  point  of  view,  that 
the  means  of  gratification  of  a  less  urgent  want,  when  the  more  urgent  wants 
of  the  present  are  satisfied  completely,  should  be  preferred  to  the  means  of 
over-gratifying  the  latter. 

*Thus  the  price  of  many  dark  articles  of  apparel  rises  in  a  moment  of  un- 
expected universal  mourning.  A  very  remarkable  case  in  Paris,  at  the  death 
of  Henry  II.  (Alontanari,  Delia  Moneta,  85,  Custodi.)  On  the  other  hand, 
a  change  of  fashion  inay  greatly  depress  the  price  of  many  commodities. 
Such  a  change  may  take  place  even  in  the  case  of  precious  stones;  as,  for 
instance,  now  in  Loudon,  a  perfect  emei-ald  is  most  highly  prized.  (King, 
Precious  Stones  and  Metals,  1S71.)  The  rise  of  many  drugs  in  times  of 
cholera,  and  of  leeches,  for  example,  in  Paris,  600  per  cent.  Rise  of  the  price 
of  powder,  horses  etc.  at  the  outbreak  of  a  war,  and  of  the  price  of  iron 
caused  by  extensive  railroad  building.  In  Circassia,  a  good  shirt  of  mail  was 
formerly  worth  from  10  to  200  oxen :  but  since  it  was  discovered  not  to  be  a 
protection  against  cannon  balls,  its  price  fell  50  per  cent.  (Bell,  Journal  of  a 
Residence  in  Circassia,  I,  403. 

■•  On  "  connected  "  (connexen)  goods,  the  use  of  one  of  which  supposes  the 
use  of  the  other,  as,  for  instance,  sugar  and  coffee,  wood  and  stone  used  in 
the  construction  of  buildings,  see  Schdffie,  Nat.-Oek,  II.  Aufi.,  179. 


Sec.  CIII.j  INDISPENSABLE  GOODS.  311 

SECTION  cm. 

DEMAND.  — INDISPENSABLE  GOODS. 

When  the  supply  of  articles  of  luxury  diminishes,  the  price 
of  them,  it  is  true,  rises.  But  as  now  there  is  a  number  of 
purchasers  no  longer  able  to  pay  for  them,  the  demand  for 
them  also  decreases,  and  their  price,  as  a  consequence,  rises  in 
a  less  deo-ree  than  mioht  be  inferred  from  the  amount  and  con- 
dition  of  the  supply  merely.  And  so,  on  the  other  hand,  an 
increase  of  the  supply  which  lowers  the  price  is  wont,  in  the 
case  of  pleasures  capable  of  a  wide  extension,  such  as  are  min- 
istered to  by  fine  roots,  vegetables,  etc.,  to  produce  an  increase 
of  the  demand,  and  this  operates  to  arrest  the  falling  price. 

It  is  quite  otherwise,  in  the  case  of  indispensable  goods,  as  for 
instance,  wheat.  When  there  is  a  want  of  such  an  article,  men 
prefer  to  dispense  with  all  other  articles,  to  some  extent,  rather 
than  to  practice  frugality  in  bread ;  and  all  the  more,  as  bread 
is  not  so  much  used  as  consumed  rapidly,  while  clothes  and 
metallic  articles  last  a  long  time.  And  even  after  an  over- 
abundant harvest,  leaving  voluntary  waste  out  of  the  question, 
consumption  is  increased  by  a  finer  separating  of  the  flour,  an 
increase  in  the  amount  of  corn  fed  to  cattle,  and  the  distillation 
of  spirits.  Hence,  demand  and  supply  by  no  means  nin  in 
parallel  lines  at  every  moment;  and  indispensable  articles  tend 
to  greater  perturbations  in  price  than  those  which  can  be  dis- 
pensed with.^  ^    The  price  of  grain,  especially,  varies  in  a  ratio 

'  Observed  by  JVecker,  Sur  la  Legislation  et  le  Commerce  des  Grains,  1776. 
Compare  RoscJier,  Ueber  Kornhandel  und  Theuerungspolitik.  1S53,  i  ft".  In 
Athens,  for  instance,  the  medimnos  of  wheat  cost  ordinarily  five  drachmas, 
but  during  the  siege  by  Sulla  it  rose  to  looo  drachmas.  (Demosth.  adv. 
Phorm.,  91S.  Plutarch^  Sulla,  13.)  Compare  II.  Kings,  6,  25,  7,  i.  In  Paris 
during  the  siege  by  Henry  IV.  it  rose  to  5000  per  cent,  of  the  ordinary  price. 
(Lauderdale^  Inquiry,  60  ft")  During  the  siege  of  Breisach,  in  163S,  a  mouse 
■was  finally  worth  i  florin,  the  quarter  of  a  dog,  7  florins,  a  quarter  of  Avheat, 
80  thalers.  (Rose,  Leben  H.  Bernhards,  M.,  :i,  269.)  Compare  Strabo,  V, 
248  seq. 

'  Wheat  is  still  more  indispensable  than  meat.     Hence,  in  the  ten  principal 


312  CIRCULATION  OF  GOODS.  [B.  II,  Ch.  II. 

very  different  from  the  inverse  ratio  of  tlie  amount  of  the 
harvest ;  ^  although  a  formula  therefor  expressed  in  figures, 
like  that  of  Gregory  King,  can  never  be  applicable  universal- 
ly.* Farmers  must  everywhere  and  always  withhold  a  certain 
amount  of  their  harvest  for  seed,  for  home  use  etc.,  from  the 
market.  Only  absolute  necessity  can  induce  them  to  draw  on 
the  quantity  thus  laid  by.  But  the  ratio  of  this  part  to  the 
whole  is  very  different  in  different  countries.^  In  the  higher 
stages  of  civiHzation,  where  payment  in  money  has  taken  the 
place  of  payment  in  produce,  and  all  other  kinds  of  payment, 
and  where  the  cultivator  of  the  ground  pays  the  wages  of  his 

markets  of  Prussia,  the  price  of  rye  rose  much  more  from  1811  to  i860  than 
the  price  of  beef;  the  former  between  0.32  and  1.03  silver  groschens  and  tiie 
latter  between  2.32  and  4.94  silver  groschens.  (Annalen  der  preussischen 
Landwirthschaft,  1869,  No.  9.)  And  so  in  the  Rhine  district,  the  wine  harvests 
have  undergone  much  greater  changes  in  price  than  the  prices  of  must,  al- 
though the  years  differed  very  largely  in  the  quality  of  the  yield.  Thus  the 
crop  of  1830  was  only  225,  that  of  1S68,  10,845  pieces,  and  yet  the  mininium 
price  between  1831  and  1865  was  only  from  3  to  58  flr.  per  ome.  (Engcl^ 
Preuss.  Statist,  Ztschr.,  1871,  16S  ff. 

3  In  England,  the  price  of  wheat  has  not  unfrequently  risen  from  100  to 
200  per  cent,  when  the  harvest  Avas  from  one-sixth  to  one-third  imder  the 
average,  and  when  a  supply  from  abroad  '  had  modified  even  this  condition 
of  things.  (Tooke,  History  of  Prices,  I,  10  ff.)  Tooke  is  of  opinion  that  in  a 
country  with  poor-laws  like  those  of  England,  a  deficit  of  one-third  in  the 
wheat  crop,  if  there  were  no  stores  remaining  and  no  importation  from 
abroad,  would  cause  the  price  of  wheat  to  rise,  500,  600,  and  even  1000  per 
cent.  (p.  15.) 

*See  Davenant,  Political  and  Commercial  Works,  London,  1771,  II,  224. 
Tooke  was  somewhat  acquainted  with  Davenant.  According  to  this  law,  a 
deficit  in  the  harvest  of  10  per  cent,  would  raise  the  price  of  corn  30  per 
cent. ;  one  of  20  per  cent,  would  raise  the  price  of  corn  80  per  cent. ;  one  of 
30  per  cent,  would  raise  the  price  of  corn  160  per  cent.;  one  of  40  per  cent, 
would  raise  the  price  of  corn  280  per  cent. ;  one  of  50  per  cent,  would  raise 
the  price  of  corn  450  per  cent. 

*  In  England,  it  is  3S.8  per  cent,  of  the  supply  that  comes  to  the  market. 
(Quart.  Review,  XXXVI,  425.)  In  Belgium  40,  and  in  Saxony  at  least  50 
per  cent.  (Engel,  Jahrb.  der  Statistik  etc.  von  Sachsen,  i,  276.)  In  Ger- 
man}', the  farmers  consume  on  an  average  two-thirds  themselves,  (v.  Vie- 
bah?i,  Zoll.-v-Statist.,  II,  958.)  With  this  Plato,  De  Legg.,  VIII,  agrees  re- 
mai-kably  well. 


Sec.  civ.]  PURCHASER'S  SOLVABILITY.  313 

laborers  almost  exclusively  in  money,  so  that  they,  like  all 
others,  purchase  what  bread  they  require  in  the  market;  a 
given  deficit  in  the  harvest  must  be  spread  over  a  much  larger 
market  supply;  and  prices,  therefore,  remain  much  less  affect- 
ed than  in  the  lower  stages  of  civilization.*'  And  so,  it  is  clear 
that  a  like  bad  harvest  must  aflect  prices  very  differently,  if 
there  be  a  large  importation  or  exportation  of  the  means  of 
subsistence,  and  if  several  bad  harvests,  or  several  harvests 
yielding  more  than  the  average  have  preceded. 

In  another  respect  yet,  the  price  of  indispensable  commodi- 
ties is  very  sensitive,  because  here  the  mere  fear  of  a  future 
want  of  them  has  a  far  deeper  and  wider  influence,  than  has 
the  fear  of  want  of  articles  of  luxury.  No  matter  how  good 
the  wheat  crop  may  have  been,  if  the  weather  afterwards 
interferes  with  its  harvesting,  the  price  of  wheat,  in  countries 
in  which  the  spirit  of  speculation  is  on  the  alert,  will  certainly 
rise,  because  the  prospect  of  the  future  crop  then  becomes 
somewhat  doubtful.'' 

SECTION   CIV. 

INFLUENCE  OF  PURCHASER'S  SOLVABILITY  ON  PRICES. 

The  purchaser,  besides  the  value  in  use  of  the  goods  he  de- 
sires to  buy,  considers  his  own  solvability  ( Zahluiigsjdhigkeii^ 
ability  to  pa}').  It  is  only  solvent  demand  which  can  influence 
prices.-'     For  instance,  among  a  people  made  up  almost  en- 

*  On  the  difference  in  this  respect  between  England,  Germany  and  north- 
western Norway,  see  Hermann,  p.  71. 

■"  Hence  it  not  unfrequently  happens  that  grain  grows  dear  not  from  any  real 
•want  of  it,  but  because  it  is  generally  supposed  that  such  want  exists.  For 
an  explanation  of  why  it  is  that  wheat  and  similar  commodities  have  an  al- 
most invariable  price,  when  the  average  is  taken  of  a  long  series  of  years, 
sec  infra  §  129. 

>  Case  in  Naples  in  which  after  a  poor  harvest  the  price  of  corn  remained 
very  low,  because  the  oil-harvest  had  also  failed,  and  the  poor  could  earn 
nothing  in  that  industry  in  which  they  were  largely  employed,  and  vice 
vorsa.     (Galliani,  Delia  Moneta,  II,  2.)     Thus  Adam  Smiifi^  Wealth  of  Na- 


314  CIRCULATION  OF  GOODS.  [B.  II,  Cii-  II. 

tirely  of  proletarians,  there  will  be  a  great  many  cases  of 
starvation  and  death  after  a  bad  harvest,  but  the  price  of  corn 
will  undergo  only  a  slight  increase.'^  But  where  the  greater 
number  of  inhabitants  own  property,  and  where  the  wealthy 
come  to  the  help  of  the  poorer  classes  by  means  of  poor-rates 
and  acts  of  benevolence,  it  is  scarcely  possible  to  assign  limits 
to  the  increase  of  the  price  of  corn.  By  a  necessary  connec- 
tion, when  indispensable  articles  grow  dear,  the  demand  for 
articles  that  can  be  dispensed  With  generally  decreases,  and 
vice  vc7'sa?  Every  merchant,  engaged  in  an  extensive  business, 
is  interested  in  knowing  in  advance  the  results  of  the  corn 
crop.  The  higher  the  price  of  a  commodity  rises,  the  nar- 
rower, of  course,  grows  the  circle  of  those  who  can  pay 
for  it. ''  5 

tions,  I,  ch.  7,  distinguishes  between  "effectual"  and  "absolute"  demand. 
Similarly  J.  Stenarf,  Principles  I,  ch.  iS.  Care  should  be  taken  to  distin- 
guish in  this  respect  between  desire  and  demand. 

''^Thus,  in  the  famine  in  Ireland  in  1S21,  during  which  potatoes  rose  to  fab- 
ulous prices,  but  wheat  scarcely  at  all,  and  had  therefore  to  be  exported. 

"  In  Tooke,  History  of  Prices  (2d  edition  of  the  Thoughts  and  Details  etc.), 
we  meet  repeatedly  with  the  assertion  that  when  the  price  of  wheat  rises,  the 
price  of  colonial  products  and  manufactured  articles  sinks,  and  vice  versa. 
Thus,  in  England,  the  price  of  the  evidences  of  national  debt  increases  from 
two  to  three  per  cent,  in  fruitful  years  above  what  it  is  after  a  bad  harvest. 
( Lauderdale,  Inquiry,  93.)  The  British  nation  paid  for  the  cotton  it  needed 
for  their  own  consumption  in  1845  over  £19,500,000;  in  1S47  only  £9,500,000. 
(Banfield,  Organization  of  Industry,  162.) 

^  Hence  y.  B.  Say  has  said  that  the  disposable  wealth  of  a  people  is  like  a 
pyramid,  with  the  scale  of  prices  of  the  various  commodities  inscribed  on  its 
side.  The  higher  a  commodity  is  in  this  scale  of  prices,  the  smaller  is  the 
corresponding  section  of  the  pyramid.  Compare  Sir  IV.  TeiJiJ>le,  Essay  on 
the  Origin  and  Nature  of  Government,  Woi-ks  I,  23  ff. 

5  This  fact,  in  connection  with  the  preceding,  explains  the  well  known  puz- 
zle, why  the  remnant  of  a  piece  of  goods  is  comparatively  cheaper  than  the 
whole  piece,  while  a  small  share  in  the  public  debt  is  dearer  than  a  large  one. 
(Lauderdale^  ch.  i.) 


Secs.  CV,  CVI.]       SUPPLY.  — COST  OF  PRODUCTION.  315 

SECTION  CV. 

SUPPLY. 

In  the  case  of  isolated  chance  exchanges,  the  seller,  too,  takes 
into  consideration,  first  of  all,  value  in  use,  and  compares  the 
satisfaction  which  the  commodity  to  be  parted  with  and  that 
to  be  received  are  able  to  afford.  It  is  true  that  in  making 
this  estimate,  he  is  subject  in  the  highest  degree  to  error 
and  deception.^  In  the  well  ordered  trade  of  a  nation  whose 
economy  is  highly  developed,  the  seller,  who  had  this  very 
trade  in  view  in  his  production,  is  wont  to  consider  almost  ex- 
clusively the  value  in  exchange  of  his  commodity. 

SECTION  CVI. 

THE  COST  OF  PRODUCTION. 

As  no  one  is  willing  to  lose  anything,  every  seller  will  con- 
sider what  his  goods  have  cost  him,  and  the  cost  of  produc- 
ing or  procuring  them  as  the  minimum  price  to  be  asked  for 
them.^     At  the  same  time,  the  idea  covered  by  the  expression 

1  Rhode  Island  Avas,  it  is  said,  bought  from  the  Indians  in  163S  for  a  pair 
of  spectacles.  (B.  JF'?-a?iklin,  FoMtical  .  .  .  Pieces,  1707.)  According  to 
Chalmers,  it  was  bought  for  50  threads  of  coral,  12  hatchets  and  12  overcoats. 
(Political  Annals  of  the  U.  States.)  Compare  Ebeling,  II,  108.  Holland 
cloths  and  opium  were  exchanged  for  a  long  time  at  Sumatra  for  gold  dust 
worth  ten  times  their  value.  (Saalfeld,  Geschichte  des  holl.  Koloniahvesens, 
I,  260.)  The  Hudson  Bay  Company  realized,  it  is  said,  at  the  beginning  of 
this  century,  in  trading  with  the  Indians,  a  profit  of  2000  per  cent.  (Anderson, 
Origin  of  Commerce,  a.  1751.)  When  Altai  was  discovered,  the  natives  gave 
as  many  sable-skins  for  a  Russian  kettle  or  boiler  as  could  be  crammed  into 
it.  With  10  rubles  in  iron  it  was  an  easy  easy  matter  to  gain  500-660  rubles. 
Siorch,  Gemalde  des  russ.,  R.,  II,  16;  K.  Rittcr,  Erdkunde,  II,  557.  Similar 
cases  among  the  Germans :   Tacit.,  Germ.,  5. 

1  A  seller  not  actually  engaged  in  the  business  of  selling  for  a  livelihood, 
and  w^ho  has  not  purchased  or  produced  with  the  intention  of  selling,  is  apt 
to  consider  instead  of  this  the  market  price,  towards  the  determination  ot 


316  CIRCULATION  OF  GOODS.  [B.  II,  Ch.  II. 

cost  of  production,  although  it  always  embraces  whatever  dis- 
appears from  the  resources  of  the  producer  to  enter  into  pro- 
duction, varies  very  much  according  as  it  is  considered  from 
the  point  of  view  of  the  individual's,  the  nation's  or  the  world's 
economy. 

An  individual  who  pays  taxes  to  his  government,  and  who 
has  rented  land  and  employed  labor  and  capital  to  engage  in 
production,  must  indeed,  besides  the  capital  he  has  used  in 
such  production,  call  all  his  outlay  in  interest,  wages,  rent, 
and  taxes,  by  the  name  of  cost  of  production;^  since,  unless 
they  all  come  back  to  him  in  the  price  of  the  commodity,  the 
entire  enterprise  can  only  injure  him.^  He  will,  of  course,  add 
an  equitable  prolit  to  remunerate  him  for  his  enterprise,  since 
without  such  profit,  he  would  not  be  able  to  live  or  produce ; 
or  else,  he  would  be  compelled  to  consume  his  capital.  The 
moment  the  current  rates  of  taxation,  interest,  wages  and  rent 
change  in  a  country,  the  cost  of  production  is  also  changed 
in  the  case  of  the  individual  engaged  in  production,  however 
unaltered  the  technic  process  may  remain."*     But  taking  the 

^vhich  those  actually  engaged  in  trade  have  cooperated.  Somewhat  inaccu- 
rately', the  amount  of  the  cost  of  production  is  called  by  Adam  Siiitfh  and 
Ricardo,  "  natural  price,"  by  J.  B.  Say,  pnx  naturel,  also  prix  originairc,  be- 
cause the  commodity  at  its  first  entrance  into  the  world  cost  so  much.  Sis- 
mondi  and  Storch  call  it  prix  necessaire,  and  Lotz,  Kostcnpreis.  P.  Cantillon, 
Nature  de  Commerce,  33  ft",  understands  by  the  prix  intrinsique  of  a  com- 
modity, the  amount  of  land  and  labor,  taking  the  quality  of  both  also  into 
consideration,  necessary  to  its  production. 

^  The  cheapest  cotton  thread  is  numbered  from  60  to  So.  The  coarser  is 
dearer  on  account  of  the  quantity  of  raw  material  in  it,  and  the  finer  because 
of  the  greater  amount  of  labor  in  it.  (Babbagc.)  For  similar  reasons,  the 
Venetian  chains  cost  per  braca'o,  No.  o,  the  finest,  60  francs;  No.  i,  40  francs; 
Nos.  2  and  3,  20  francs ;  No.  24,  coarsest,  60  francs.     (Ra7(.) 

2  If  a  person  engaged  in  production  has  himself  furnished  certain  of  the 
elements  of  production ;  if,  for  instance,  he  has  worked  with  his  own  hands, 
emplo^'ed  his  own  capital  etc.,  he  is  wont  to  charge  as  much  for  these  as  they 
would  be  worth,  if  he  hired  himself  out  or  loaned  his  capital. 

•*The  greater  number  of  political  economists  consider  the  cost  of  produc- 
tion only  from  the  standpoint  of  the  individual  engaged  in  production.  Thus 
Darjes,  Erste  Griinde,  218  seq. ;  Ad.  Smith,  Wealth  of  Nations,  I,  ch.  6.     y. 


Sec.  CVI.]  COST  OF  PRODUCTION.  317 

nation,  or  all  mankind  into  consideration,  we  must  not  lose 
sight  of  the  fact  that  these  three  great  sources  of  income,  as 
well  as  taxation,  are  not,  rightly  speaking,  sources  from  which 
income  flows,  but  rather  channels  through  which  the  aggre- 
gate income  of  the  nation  or  the  world  is  distributed  among 
individuals.'^  Hence  the  wages  of  labor,  for  instance,  which 
afford  the  means  of  living  to  the  greater  part  of  the  popula- 
tion, cannot  possibly  be  looked  upon  simply  as  a  factor  in  eco- 
nomic production.  The  people  considered  in  their  entirety  have 
the  soil  gratis.  All  saving  made  from  rent,  interest  on  capi- 
tal, or  wages,  is  nothing  but  a  change  of  the  proportion  in 
which  the  results  of  production  were  distributed  hitherto 
among  couperators  in  production.  Such  a  change  may  be 
either  advantageous  or  the  revese ;  but  it  is  not  a  diminution  of 
the  amount  of  sacrifice  which  the  people  in  general  must  make 
for  purposes  of  production.  Hence,  in  a  politico-economical 
sense,  to  the  cost  of  production,  belongs  only  the  capital 
necessarily  expended  in  production,  and  which  has  disappeared 
as  a  part  of  the  nation's  resources,  abstraction  made  of  the 
personal  sacrifices  in  behalf  of  production.^  The  value  of  the 
circulating  capital  which  in  the  proces  is  entirely  used  up,  must, 


B.  Say  calls  even  production  an  exchange  in  Avhich  the  productive  services 
of  natural  forces,  of  labor  and  of  capital  are  parted  with  in  order  to  obtain 
products.  The  estimate  put  upon  the  value  of  these  services  is  the  cost  of 
production.  For  some  interesting  examples  as  to  how  the  cost  of  production, 
in  this  sense,  is  calculated,  see  Hermann,  I  ed.,  136  ff. 

5  yacob  translated  by  Say,  1S07,  II,  450.   Hit-f eland,  N.  Grundelgung,  I,  309. 

5  Compare  L.  Lauderdale,  Inquiry,  124,  against  the  Physiocrates.  (Rtedel, 
Nat.-Oekonomie,  1838,  I,  68.)  A  country  which  possesses  advantages  over 
other  countries,  in  respect  to  the  cost  of  production  of  a  commodity,  can  ofter 
it  in  the  market  cheapest.  Where,  for  instance,  with  the  employment  of  the 
same  amount  of  capital,  a  specially  large  quantity  of  wheat  can  be  produced, 
whether  it  be  because  of  the  unusual  fertility  of  the  soil,  or  because  of  the 
extensiveness  of  agriculture  (farming  over  a  large  area),  wheat  will,  the  de- 
mand being  the  same,  be  specially  cheap,  whatever  the  proportion  of  the  three 
branches  of  income  may  have  been.  If  relatively  a  great  number  of  work- 
men have  been  employed  in  its  cultivation,  each  will  receive  smaller  wages, 
and  vice  versa. 


318  CIRCULATION  OF  GOODS.  [B.  II,  Cn.  II. 

of  course,  be  entirely  restored  in  the  price,  that  of  the  fixed 
capital  used  only  to  the  extent  that  it  has  been  used.'^ 

The  risk,  which  the  producer  runs  until  the  commodity 
produced  is  actually  consumed  must  also  be  borne  in  mind.^ 
There  are  things  which  are  a  real  risk  in  small  enterprises 
that  by  the  intervention  of  an  insurance  company,  or  where 
the  enterprises  are  large  and  insure  themselves,  become  a 
more  or  less  variable  portion  of  the  cost  of  production.  The 
price  of  the  product,  in  the  latter  instance,  rises,  by  this  means, 
very  regularly.  In  the  former  case,  the  rise  depends  partly 
on  the  feeling  of  the  people  whether  their  pleasure  in  gain  is 
greater  than  their  grief  over  a  corresponding  loss.'' 

Those  enterprises  which  necessarily  produce  different  pro- 
ducts at  the  same  time  deserve  special  consideration.^^  Here 
we  may  speak  of  "  Jinited  costs  of  production,"  and  all  that  is 
needed  is  that  the  aggregate  of  these  costs  should  be  covered 
by  the  aggregate  price  of  both  products.  This  complicates 
to  a  certain  extent  the  calculations  which  the  seller  must  make 
to  determine  his  minimum  demand  for  each  product.  To  as- 
certain this,  he  must  subtract  from  the  united  costs  of  produc- 
tion the  amount  of  value  which  he  expects  with  certainty 
for  the  other  product.^^ 

'  Copper  and  steel  engraving  affords  an  example  of  the  different  kinds  of 
wear  of  fixed  capital,  and  the  influence  it  may  have  on  prices.  Canard,  Prin- 
cipes,  ch.  IV,  considers  that  one  of  the  most  important  elements  in  the  cost 
of  production  is  the  length  of  time  that  capital  must  "  stagnate"  for  the  sake 
of  production. 

8  On  this  risk  depends,  for  instance,  the  high  price  of  vanilla  (Humboldt,  N. 
Espagne,  IV,  lo,),  sparkling  wines  and  articles  of  fashion. 

'^  Mangoldt,  Lehre  voni  Unternehmergewinn,  1855,  ^i  ff.  Compare  v. 
Thiinen,  Der  isolirte  Staat,  II,  i,  80  ff. 

'"  Wool  and  mutton,  brandy  and  fattened  cattle,  calves  and  milk,  honey  and 
wax,  gas  and  coke,  hens  and  eggs  etc. 

"  Ada?n  Stniih  himself  remarked  that  all  artificial  lowering  of  the  price  of 
skins  or  avooI  must  necessarily  raise  the  price  of  the  ineat,  and  vice  versa. 
(Wealth  of  Nations,  I,  ch.  11,  3.)  For  a  very  elaborate  theory  on  this  sub- 
ject, see  y.  S.  Mill,  Principles,  III,  ch.  16,  §  i.  Thus  Australian  wool  did 
not  rise  as  inxich  in  price  as  the  production  of  gold  there  might  have  led  us 
to  suppose,  for  the  reason  that  mutton  rose  to  an  exceedingly  high  price. 


Sec.  CVII.]  EQUILIBRIUM  OF  PRICES.  319 

SECTION   CVII. 

EQUILIBRIUM  OF  PRICES. 

Goods  whose  cost  of  reproduction,^  that  is,  the  highest  neces- 
sary cost  of  reproduction  is  the  same,  have  uniformly  the  same 
value  in  exchange.  Every  deviation  from  this  level  immedi- 
ately sets  forces  in  motion  which  endeavor  to  restore  the  level, 
just  as  the  water  of  the  sea  seeks  its  level,  notwithstanding 
the  mountains  and  abysses  which  the  winds  bring  forth  from 
its  bosom.  ^  ^ 

'  It  is  an  important  and  correct  remark  of  Carcy^s^  that  the  price  of  a  com- 
modity depends  much  more  on  the  cost  of  producing  its  like  than  on  its  own 
cost  of  production,  which  already  belongs  to  the  past. 

"^  Compare  J.  S.  Mill,  III,  ch.  3,  §  i.  A  much  too  high  price,  caused  by 
speculation,  or  a  much  too  low  one,  by  depreciation,  is  regularly  followed  by 
an  ebb  or  flow  just  as  much  too  great.  (Tooke,  History  of  Prices,  III,  55.) 
And  Latv,  Trade  and  Money,  41,  remarks  that  the  price  of  a  commodity 
always  tends  to  coincide  with  the  "  first  cost."  This  fact  Adam  Smith  ex- 
presses by  saying  that  the  cost  of  production  is  the  center  about  which  the 
market  price  always  gravitates,  fl,  ch.  7.)  But  here  there  is  still  the  error 
lurking,  that  the  producer's  profit  is  a  part  of  the  cost  of  production.  Com- 
pare Malihus,  Definitions,  ch.  6. 

*  The  English  view,  one  very  chai-acteristic  of  the  people,  is  that  the  equi- 
librium of  prices  depends  on  this,  that  all  commodities  should  have  a  value 
eqvial  to  that  of  the  labor  they  have  cost.  (Compare  Aristot.,  Eth.  Nicom., 
V,  5,)  The  same  doctrine  is  to  be  found  in  its  germinal  state  in  Hobbcs, 
Leviathan,  24,  165 1,  and  Rice  Vaug/iaii,  Discourse  of  Coin  and  Coinage, 
1675.  More  exhaustively  in  Petty,  Treatise  of  Taxes  and  Contributions,  1679, 
24,  31,67.  (Compare  Locke,  Civil  government,  II,  §  40  ff. ;  B.  Franklin^ 
Inquiry  into  the  Nature  and  Necessity  of  a  paper  Currency,  1729;  Works, 
ed.  Sparks,  vol.  II.)  Adam  Smith  admits  this  to  be  true  only  of  the  first 
beginnings  of  society,  before  the  origin  of  property  in  land  and  in  capital. 
(Wealth  of  Nations,  I,  ch.  5.)  Most  largely  developed  in  Ricardo,  Principles, 
ch.  I,  4,  30.  Marx,  Zur  Kritik  der  polit.  Gi^konomie,  1S59,  6,  endeavors  to 
improve  on  this  by  calling  all  values  in  exchange  "  a  determinate  quantity 
of  thickly  curdled  working-time,"  meaning  by  work  an  averaged  qualitdtslose, 
social  work  of  production.  Per  contra,  compare  Iluf eland,  N.  Grundlegung, 
I,  134,  156  ff.;  and  Malthus,  Principles,  ch.  2,  sees.  2,  3,  who  claims  very 
earnestly  that  price  is  not  determined  by  the  cost  of  production,  but  by  the 
relation  existing  between  demand  and  supply,  the  cost  of  production  influ- 


320  CIRCULATION  OF  GOODS.  [B.  II,  Ch.  II. 

SECTION  CVIII. 

EFFECT  OF  A  RISE  OF  PRICE  MUCH  ABOVE  COST. 

If  the  market  price  rises  high  above  the  cost  of  production, 
producers  make  a  profit  greater  than  the  average  profit  made 
in  the  country.  This  induces  them,  by  the  appropriation  of 
new  land  and  tlie  employment  of  new  labor  and  capital,  to 
increase  their  business.  Other  parties  also  engage  in  this 
profitable  department  of  trade.  This  competition  not  only 
makes  the  means  of  production  dearer,  but  must  eventually, 
by  increasing  the  demand,  reduce  the  price  of  the  product  to 
the  ordinary  level  of  profit,  that  is  to  an  equilibrium  with  other 
commodities.^     Hence,  in  the  beginning,  every  diminution  of 

encing  it  only  to  the  extent  that  it  influences  this  relation.  He  calls  atten- 
tion to  the  poor-rates  bj  which  the  cost  of  production  of  labor  is  i-aised,  but 
its  wages  decreased;  also  to  the  case  of  bank  notes  etc.  (Tooke,  History  of 
Prices,  V,  49  ff;  y.  S.  Alill,  Principles,  III,  ch.  16,  2.)  For  a  very  marked 
case  of  reaction  against  Adam  Smith  and  Ricardo,  see  Macleod^  Elements, 
ch.  2,  who,  however,  is  much  too  one-sided  in  considering  only  the  amount 
necessary  to  the  purchaserj  and  his  means.  Even  Condillac  had  said:  une 
chose  11' a  fas  une  valeur^  farccqiCclle  coute,  mat's  elle  coute  (du  travail  ou  de 
rargent),farcequ'eUe  a  une  valcur.  (Commerce  et  Gouvernement,  16.)  Ri- 
cardo's  doctrine  is  more  tenable  than  appears  at  first  blush.  We  need  only 
to  interline  his  theory  of  rent,  admit  that  capital  is  accumulated  labor,  sub- 
tract all  objects  constituting  a  natural  monopoly,  and  not  forget  that  the 
intrinsic  value  of  labor  is  one  of  the  causes  of  the  difference  of  price  of 
diflerent  sorts  of  labor.  Ricardo  does  justice  to  value  in  use  even  en  fassant. 
A  strange  effort  by  McCtiUoch  to  make  labor  the  cause  of  the  non-use  of 
capital.  (Principles,  III,  ch.  6,  2.)  McCnllocJi  has  not  unfrequently  exagger- 
ated the  half-truths  of  his  doctrines  to  such  an  extent  as  to  produce  unwit- 
tingly a  reductio  ad  abstirdum.  According  to  Torrens,  before  any  separation 
of  capitalists  from  workmen,  price  dejiends  entirely  on  the  work  done,  and 
afterwards  on  the  capital  expended,  inasmuch  as  wages,  rent  etc.  are  covered 
by  the  capital  of  the  person  who  engages  in  the  enterprise.  (Production  of 
Wealth,  ch.  i.) 

^  Ce  que  V  on  appclle  chereti^  c'est  V  unique  remede  d  la  chercte.  (Dupont  de 
Nemours.)  Tenders  of  division  in  common,  in  England,  increase  and  de- 
crease according  to  the  higher  or  lower  price  of  corn  during  the  preceding 
year.     (Tooke,  Thoughts  and  Details,  III,  105  ff.)     The  cotton  famine  after 


Sec.  CVIII.]  EFFECT  OF  A  RISE  OF  PRICE.  32] 

the  cost  of  production  ^  turns  to  the  advantage  of  the  producer ; 
but  afterwards  and  permanently  to  that  of  the  consumers :  an 
economic  law  exceedingly  benelicent  in  its  operations,  and  not 
unlike  the  action  of  positive  legislation  in  the  matter  of  patents. 
There  is  no  greater  stimulus  to  the  making  of  improvements 
than  the  certainty  of  reward  to  the  person  who  first  intro- 
duces one.  The  moment,  however,  that  the  improvement  is 
imitated  by  all  producers,  the  advantage  gained  by  it  becomes 
the  common  good  of  the  whole  nation.^  These  are,  as  J.  B. 
Say  says,  conquests  made  over  the  gratuitous  productive  force 
of  nature.  As  a  consequence,  the  value  in  use  of  a  people's 
resources  increases;  generally,  also,  their  value  in  exchange, in 
so  far  as  the  production  of  the  now  cheaper  goods  increases 
in  a  degree  greater  than  their  cost  of  production  has  dimin- 
ished.* 

As  to  the  alternative  so  frequently  discussed,  whether  it  is 
preferable  to  make  a  large  percentage  of  profit  on  the  sale  of 
a  small  quantity  of  goods,  or  a  small  percentage  on  a  large 
quantit}',  we  find  that,  in  the  lower  stages  of  civilization,  the 

lS6i  increased  the  price  of  flax-yarn  in  a  short  time  fifty  per  cent.,  although 
the  raw  material  of  flax  did  not  rise  in  price,  but  only  because  care  was  not 
taken  to  increase  the  number  of  flax-spinners.  (Aiislaud,  I,  1865.)  How- 
ever, there  were  in  1S64,  490,000  flax-machine  spindles  in  course  of  election. 
(Report  of  the  Chemnitz  Chamber  of  Commerce,  1864,  loi.) 

^  By  the  discovery,  for  instance,  of  new  natural  forces,  the  invention  of 
machines,  improved  division  of  labor,  improved  roads  etc.  In  France,  in 
consequence  of  techmc  improvement,  a  quintal  of  saltpeter  fell  from  100  to 
9  francs.     See  a  similar  instance  in  CJiaftal^  De  1'  Industrie  fran^aise,  II,  64, 

70.  434- 

^  Hermami^  Staatsw.  Untersuchungen,  212. 

■'The  highest  but  unattainable  ideal  of  such  progress  would  consist  in  this, 
that  all  products  should  be  obtained  without  cost.  If  this  ideal  were  attain- 
able, evei-y  one  would  be  infinitely  rich  and  all  wealth  would  be  free,  like  the 
air  and  the  sunshine.  (Compare  J.  B.  Say^  Traite,  II,  2.)  The  complete 
victory  of  mankind  over  nature  would  consist  in  that  all  men  should  be  free 
and  all  the  forces  of  nature  the  slaves  of  man.  (Smitthenner.)  Carey  inti- 
mates something  similar  when  he  says  that,  with  the  advance  of  civilization 
the  tendency  is  for  men  to  become  more  and  more  valuable  and  commodi- 
ties to  have  less  of  "value." 
Vol.  I.— 21 


322  CIRCULATION  OF  GOODS.  [B.  II,  Ch.  II. 

> 

former  is  preferred,  and  the  latter  in  the  higher.^  And,  indeed, 
the  latter  is  not  only  more  humane,  but,  in  the  long  run,  it  is 
more  profitable  to  the  person  who  adopts  it  as  his  rule  in  busi- 
ness. In  the  case  of  commodities,  he  now  runs  but  little  risk 
from  a  change  of  fashion,  because  the  fashions  of  the  masses 
change  much  less  rapidly  than  those  of  the  upper  circles  of 
society.  In  the  case  of  indispensable  goods,  on  the  other  hand, 
he  may  now  calculate  with  more  certainty  on  the  increase  of 
population,  and,  therefore,  on  a  future  market  for  his  wares. 
Competition,  which  in  former  times,  devoted  all  its  efforts  to 
bringing  about  the  exclusion,  by  law,  of  all  rivals,  is  now  en- 
gaged, principally,  in  devising  means  of  surpassing  them  by 
superiority  of  workmanship,  and  in  thus  increasing  the  power 
of  the  real  sources  of  a  nation's  wealth. 

^  We  niight  here  speak  of  an  aristocratic  and  democratic  principle  of  the 
determination  of  prices.  The  greater  utility  of  the  latter  is  advocated  in  the 
Discourse  of  Trade,  Covn  and  Credit,  London,  1697.  Bacon  has  a  good 
word  to  saj  for  the  maxim:  "Light  gains  make  heavy  purses;  for  light 
gains  come  thick,  Avhereas  great  come  now  and  then."  Similarly,  Gurnay 
in  CJiquot  de  Blci-vaclic,  Considerations  svir  le  Commerce  etc.,  175S,  48,  54. 
As  to  how  Morrison,  the  celebrated  merchant,  became  rich  by  adhering  to 
the  principles :  "  to  sell  cheap  as  well  as  to  buy  cheap,"  and  "  always  tell  the 
truth,"  see  CJtadtvick,  in  the  Statistical  Journal,  1S62,  503.  Com.pare  the 
related  opinion  of  Adam  SmitJi's  continuator  in  an  ethical  direction,  Garve, 
zu  Cicero's  Pflichten,  III,  100.  The  contrary  principle,  the  cunning  of  the 
Judaeans,  according  to  Strabo,  XVII,  800,  was  followed  by  the  Dutch  East 
India  Company,  when  it,  in  1652,  caused  the  greater  number  of  the  vegeta- 
ble roots  on  the  Moluccas  to  be  desti'oyed.  Saalfeld,  Geschichte  des  hol- 
landischen  Kolonialwesens,  I,  272.  Also,  when  great  quantities  of  roots  were 
destroyed  by  burning  in  the  East  Indies.  (Huysers  Beschryving  der  Oost- 
indischen  Etablissmenten,  1789,  22.)  For  a  clever  argument  against  such 
practice,  see  de  la  Court,  Anwysing  der  heilsame  Gronden,  1663.  The  prin- 
ciple similar  to  that  of  the  patent,  mentioned  in  the  text,  works  at  the  same 
time  democratically  and  aristocratically,  both  words  understood  in  their  best 
sense. 


Sec.  CIX-l        EFFECT  OF  A  DECLINE  OF  PRICE.  303 

SECTION  CIX. 

EFFECT  OF  A  DECLINE  OF  PRICE  BELOW  COST. 

If  the  market  price  sinks  below  the  cost  of  production,  tlie 
producer  naturally  suffers  a  loss,  and  diminishes  his  stock  as 
soon  as  possible.  That  whole  establishments  engaged  in  in- 
dustiy  should  forsake  a  branch  of  it  which  is  suffering  from 
depression  and  enter  a  flourishing  one,  must  ever  remain  a 
rare  exception.^  But  the  discouraged  manufacturer  may  de- 
lay renewing  his  stock  on  hand,^  replacing  his  machinery  by 
new  machinery;  he  may  dismiss  some  of  his  workmen  and 
diminish  the  number  of  days  during  which  the  others  shall 
work.  Moreover,  most  industries  are  operated  by  means  of 
borrowed  capital,  capital  which  must  therefore,  be  returned  to 
the  lender.  Under  certain  circumstances,  however,  the  indus- 
try may  be  continued  for  some  time,  even  at  a  real  loss,^  so 
long  as  the  loss  of  interest  etc.,  which  would  follow  the  entire 
suspension  of  the  work,  exceeds  the  loss  produced  by  the  low- 

'  This  is  true,  first  of  all,  in  those  industries  which  are  intimately  connected 
with  one  another,  or  of  those  which  are  carried  on  with  scarcely  any  fixed 
capital ;  also  in  lower  stages  of  civilization,  where  the  lights  and  shades  caused 
by  a  highly  developed  division  of  labor  are  not  very  intense.  On  the  numer- 
ous difficulties  overlooked  by  Ricardo  in  every  other  case,  see  Sismondi,  N. 
P.,  II,  ch.  2.  The  workman  thereby  loses  his  former  skill,  that  is  his  prin- 
cipal capital,  and  can  certainly  not  wait  until  he  has  acquired  other  and  dif- 
ferent skill. 

2  When  a  lowering  of  prices  is  expected,  demand  is  less  than  consumption  : 
"  postponed  demand ; "  whereas,  an  expectation  that  the  price  will  rise,  pro- 
duces "anticipated  demand."     Tooke,  History  of  Prices,  II,  155. 

3  Thus,  for  instance,  if  the  workmen  were  exposed  to  starvation,  or  were 
likely  to  take  their  departui-e;  if  great  stores  of  raw  material  were  in  danger 
of  spoiling;  if  fixed  capital  of  great  value  were  engaged  in  one  industry  and 
could  not  be  easily  h-ansferred  to  another.  The  first  and  third  causes  are  fre- 
quently met  with  in  mining,  and  give  rise  to  the  mode  of  carrying  on  the 
operation  known  as  Zubusgriiben^  that  is,  a  species  of  working  mines  upon 
shares.  In  England,  after  the  spring  of  1S62,  cotton  yarn  was  not  so  much 
dearer  than  raw  cotton,  that  the  loss  caused  by  the  decline  could  be  made  up. 
(Atisland,  24  Sept.,  1862.) 


324:  CIRCULATION  OF  GOODS.  [B.  II,  Ch.  II. 

ering  of  price,  but  hardly  any  longer.  If  the  supply  of  the 
commodity  the  price  of  which  has  fallen  has  been  diminished, 
the  subsequent  result  depends  on  the  causes  which,  in  the  first 
place,  brought  about  the  fall  in  price.  If  the  diminution  in 
price  was  caused  solely  by  a  too  great  supply,  when  this  super- 
abundant supply  is  gotten  rid  of,  the  price  will  rise  again.*  If 
it  were  produced  by  a  decrease  in  the  value  in  use  of  the  com- 
modity, the  diminution  of  the  supply  can  restore  the  former 
state  of  things  only  in  so  far  as  at  least  a  part  of  the  purchas- 
ers ascribe  to  the  commodity  the  same  value  in  use  as  before.^ 
Lastly,  if  the  lowering  of  the  price  came  from  a  decrease  in  the 
number  of  bu3'ers,  or  from  a  decrease  in  their  ability  to  pur- 
chase, the  former  price  will  be  restored  when  production  has 
been  adapted  to  a  correspondingly  smaller  circle  of  consum- 
ers.® This  last  is  true  especially  when  the  price,  without  hav- 
ing suffered  any  absolute  change,  has  become  relatively  too 
low,  on  account  of  an  increase  in  the  cost  of  production.''^ 

*  Besides,  in  the  time  immediately  following,  the  price  lowered  by  too  great 
a  supply,  may  produce  a  species  of  desperation  among  producers,  which 
would  lead  them,  in  the  hope  of  covering  their  losses,  to  increase  the  supply 
still  more,  until  many  of  them  were  ruined.  Generally,  when  a  time  of  high 
prices  is  followed  by  a  time  of  low  prices,  we  find  an  interval  during  which 
sellers  endeavor  to  defend  themselves  against  the  decline,  and  during  which, 
as  a  consequence,  scarcely  any  business  is  transacted,  while  high  prices  are 
nominally  continued.     And  so  vice  versa.     Tooke,  History  of  Prices,  II,  62. 

^  Thus,  for  instance,  when  the  change  of  fashion  brought  about  the  disuse 
of  long  periwigs  in  every-day  life,  their  price  did  not  cease  to  fall  until  they 
had  entirely  disappeared.  But,  if  a  person  wishes  to  have  one  made  to-day 
for  a  masquerade,  for  the  stage,  etc.,  he  would  pay  as  much  for  it  as  its  former 
price.  On  the  other  hand,  the  price  of  whalebone  has  never  been  again  as 
high  as  it  was  in  the  time  when  hooped  petticoats  were  worn. 

®The  great  plague  in  the  time  of  Edward  III.  caused  during  the  first  year, 
on  account  of  the  decreased  consumption,  an  extraordinary  cheapness  of 
provisions.  In  the  following  year,  however,  they  became  alarmingly  dear, 
berause  there  were  few  producers,  especially  among  the  humble  classes.  A 
quarter  of  wheat  cost  in  1348,  4s.  2d.;  in  1349,  5s.  5d.;  in  1350,  8s.  3d.;  in 
1351,  IDS.  2d. ;  while  in  1346  and  1347,  its  average  price  was  6s.  8^d.  Rogers, 
History  of  Agriculture  and  Prices,  I,  232. 

'  As  for  instance  when  new  taxes  or  excises  are  imposed.  Generally  when 
the  cost  of  production  has  largely  increased,  purchasers  do  not  wait  until  a 


Sec.  ex.]  DIFFERENT  COST.  325 

SECTION  ex. 

DIFFERENT  COST  OF  PRODUCTION  OF  THE  SAME  GOODS. 

JNIost  goods  are  produced  at  the  same  time,  but  under  dif- 
ferent circumstances,  at  a  very  different  cost.  In  order  to 
estimate  the  influence  of  this  fact  upon  price,  we  must  distin- 
guish between  those  commodities  the  cheapest  manner  of  the 
production  of  which  may  be  extended  at  pleasure,  and  those  in 
the  production  of  which  it  is  necessary,  in  order  to  satisfy  the 
aggregate  want  of,. them,  to  call  in  the  dearest  mode  of  pro- 
duction to  aid  the  cheapest. 

In  the  former  instance,  the  price  of  commodities  is  naturally 
regulated  by  the  least  cost  of  production.  The  person  who  is 
unable  to  sustain  this  competition  permanently,  would  do  a 
great  deal  better  to  abandon  the  industry  altogether;  for  it  is 
not  in  his  power  to  raise  the  price  by  diminishing  the  supply; 
more  powerful  rivals  would  then  only  need  to  correspondingly 
increase  theirs.^ 

If  the  same  law  were  applicable,  in  the  latter  case,  producers 

decrease  of  competition  among  sellers  compels  them  to  exact  higlier  prices, 
but  meet  them  half  waj^  especially  when  many  greatly  desire  the  commodity, 
and  the  increase  of  the  cost  is  only  small.     (Rati,  Handbuch,  I,  §  163.) 

'  Under  this  rule  fall,  according  to  §  33,  most  products  of  industry  prop- 
erly so  called.  "  If  we  lose  a  market  for  a  year,  we  generally  lose  it  for  all 
time,"  said  an  experienced  manufacturer  before  the  parliamentary  hand-loom 
weavers'  committee,  1840-42.  Of  course  the  cost  of  transportation  as  far  as 
the  market  must  be  estimated  as  part  of  the  cost  of  production.  In  conse- 
quence of  this,  as  well  as  of  the  difference  of  taxation  duties  etc.,  the  superi- 
ority of  one  producer  to  another  may  be  more  than  overcome.  In  the  case 
of  colonial  commodities,  which  go  into  the  interior  of  a  country  from  differ- 
ent sea-ports,  the  territory  supplied  from  each  port  is  determined  for  the 
most  part  by  these  data.  Thus,  in  Switzerland,  for  instance,  we  find  the  dis- 
tricts supplied  by  Havre,  Genoa  and  Rotterdam ;  in  Austria,  the  districts 
supplied  by  Hamburg  and  Triest  contiguous,  but  the  boundary  line  subject 
to  many  changes.  (liaii,  Lehrbuch,  I,  §  164.)  It  mvist  be  understood  that 
we  do  not  here  speak  of  abnormal  expenses  made  by  producers  individually, 
whether  in  consequence  of  want  of  skill  or  because  of  accident. 


326  CIRCULATION  OF  GOODS.  [B.  II,  Ch.  II. 

placed  in  a  less  favorable  situation  would  be  compelled  to  im- 
mediately abandon  the  market.  The  market,  in  consequence, 
would  no  longer  be  able  to  provide  for  the  aggregate  need; 
and  the  price  of  the  commodit}'  would  continue  to  rise  until 
the  producers  who  had  been  driven  from  the  market  returned 
to  it  again.  Hence,  here,  price  in  the  long  run  is  determined 
by  the  cost  of  the  production  of  the  commodity,  produced 
under  the  least  advantageous  conditions,  while  such  produc- 
tion is  necessary  in  order  to  satisfy  the  aggregate  need.  The 
person  engaged  in  production  under  more  advantageous  con- 
ditions receives  in  the  same  price  of  the  goods,  which  are 
cheaper  to  him,  an  excess  of  profit;  one  \thich  is  greater  in 
proportion  as  his  situation,  vis-a-vis  of  production,  is  superior 
to  that  of  his  less  favored  competitors.  ^  ^ 

^  This  is  true  especially  of  agricultural  production,  in  which,  as  a  rule,  be- 
side the  most  fertile  and  most  advantageously  situated  land,  the  worse  rriust 
be  used.  What  Whaicly  calls  "  surplus-profit "  appears  here  in  the  form  of 
rent,  whereas,  in  other  cases,  it  takes  the  shape  of  unusually  high  wages,  or 
profit  on  capital.  This  is  very  beautifully  and  systematically  developed  by 
Schdffle^  N.  CEk.,  II;  Aufl.,  192  fF.  According  to  Senior,  Outlines,  15,  the 
price-relation  of  two  commodities  to  each  other  depends  not  on  the  quanti- 
ties of  them  which  come  to  market,  but  on  the  relative  j^ower  of  the  diffi- 
culties which  stand  in  the  way  of  an  increase  in  these  quantities.  If  the 
same  producers  can  pursue  the  cheaper  mode  of  production  which  does  not 
suffice  to  supply  the  market,  as  well  as  the  dearer,  we  have,  generally,  a  price 
which  is  the  mean  between  the  two  costs  of  production.  The  same  is  true 
in  the  case  of  "  smuggled  "  goods  which  ought  to  have  paid  duty.  (Her- 
mann, loc.  cit.,  83,  seq.) 

^  To  this  section  belong  the  secrets  of  production  Avhich  may  be  taken  ad- 
vantage of  either  ad  libitum  or  within  certain  limits.  In  agriculture,  advan- 
tages of  production  can  seldom  remain  secret.  Compare,  however,  the  case 
mentioned  in  G«r«/Vr'5  ti-anslation  oi  Adam  vS^wzV//,  V,  119,  and  that  of  the 
orchards  Avhich  yielded  £i,ooa  yearly  for  every  32  acres,  and  which  Avere  a 
result  of  the  recent  introduction  of  the  culture  of  the  cherry  in  Kent,  in  the 
reign  of  Henry  VIII.  (Anderson,  Origin  of  Commerce,  a,  1540.)  There  is 
therefore,  a  certain  odium  attached  by  agricultural  producers  to  keeping  se- 
cret a  means  of  agricultural  improvement. 


Sec.  CXI.]  DIFFERENT  COST.  327 


SECTION  CXI. 

DIFFERENT  COST  OF  PRODUCTION  OF  THE  SAME  GOODS. 

(CONTINUED.) 

Hence  the  price  of  a  commodity  and  the  ratio  between  its 
supply  and  demand  mutually  condition  each  other.  On  the 
height  of  the  price  depends,  in  great  part,  how  many  pur- 
chasers shall  resolve  to  make  an  effectual  demand;  but,  at  the 
same  time,  to  what  amount  of  cost  of  production,  sellers  shall 
extend  their  supply.^  We  can  speak  of  an  equilibrium  between 
supply  and  demand  only  w^hen  the  former  corresponds  with 
the  wish  of  those  who  are  ready  to  make  good  the  full  cost 
of  production.  (Malthus.)  It  has  been  asked,  indeed,  whether 
it  were  more  natural  and  better  that  demand  should  precede 
supply  or  supply  demand.^  But  the  inquiry  is  an  illogical  one, 
when  expressed  in  so  general  a  manner,  since  supply  and 

1  Compare  Boisguillebert^  Traits  des  Grains,  II,  ch.  3.  yohn  Stuart  Mill 
speaks  of  an  equation :  the  price  of  a  commodity  in  a  given  maket  is  always 
high  enough  to  produce  a  demand  corresponding  to  the  present  supply,  or 
to  an  expected  supply.  The  price  of  such  commodities  only  which  may 
not  be  increased  to  any  desirable  extent  depends  on  supply  and  demand.  In 
the  case  of  all  others,  on  the  other  hand,  demand  and  supply  depend  on  the 
price,  and  this  on  the  cost  of  production.  Supply  and  demand  ahvaj-s  tend 
to  an  equilibrium  which  is  never  really  attained  where  the  price  is  high 
enough  to  cover  the  cost  of  production  (.?).  (Principles,  III,  ch.  2,  §  4;  ch. 
3,  §  2.)  Scliaffle's  theory  of  prices  is  topped  by  the  proposition  that  all  com- 
peting sellers  and  all  competing  buyers,  after  an  economic  fashion,  do  not 
wish  to  sell  below  individual  cost-value,  nor  to  rise  above  individual  value  iii 
use,  in  purchasing.  Hence,  in  a  throng  of  competition  of  supply  the  cost- 
liest productions  step  out  of  the  field  of  competition  in  a  descending  cost- 
value  series;  and  in  a  throng  of  competition  of  demand,  the  most  wearied 
cravings  in  an  ascending  value-in-use  series;  until  the  quantities  offered  in 
supply  and  asked  for  cover  each  other  without  loss,  and  have  placed  each 
other  in  quantitative  equilibrium.  (N.  CEk.  Aufl.,  I,  1S8  ff.;  compare  173, 
185.)  It  is,  however,  to  say  the  least,  an  instance  of  baseless  solicitude,  when 
Wade,  History  of  the  middle  and  working  Classes,  214,  says  that  one  un- 
employed workman  might  depress  the  aggregate  wages  of  labor,  almost 
ad  injimtum. 

-  Huf eland,  N.  Grundlegung,  I,  78;  Eicardo,  Principles,  ch.  31. 


328  CIRCULATION  OF  GOODS.  [B.  II,  Ch.  II. 

demand  are  only  two  sides  of  the  same  transaction.  But,  we 
may  say  that  in  the  case  of  indispensable  goods,  the  want  of 
them  (demand)  is  always  felt  sooner  than  the  excess  of  them 
(supply),  and  that  in  the  case  of  goods  which  may  be  dis- 
pensed with,  including,  originally,  money,  the  reverse  is  true. 
Besides,  a  person  engaging  in  the  production  of  any  kind  of 
goods,  can,  as  a  rule,  only  seldom  directly  investigate  the  re- 
lation between  supply  and  demand.  Generally,  he  can  do  no 
more  than  compare  the  market  price  of  the  commodity  with 
the  cost  at  which  he  can  produce  it.  Many  mistakes  are  in- 
evitable here ;  but  the  making  of  them  is  the  necessary  sacri- 
fice which  must  be  endured  to  purchase  the  more  than  coun- 
terbalancing advantages  of  free  competition.^ 

SECTION  CXII. 

EXCEPTIONS. 

The  rule  that  goods  which  have  the  same  cost  of  produc- 
tion have  also  equal  value  in  exchange,  is  applicable  only  to 
the  extent  that  it  is  possible  to  transfer  the  factors  of  produc- 
tion at  will  from  one  branch  of  production  to  another.  Where 
this  really  free  competition  does  not  exist,  the  price  depends 
entirely  on  the  quantity  of  the  supply,  compared  with  the 
solvability  or  capacity  to  pay  of  the  purchaser;  and  hence,  it 
may  sometimes  rise  far  above  the  cost  of  production  (monop- 
oly-price), and  sometimes  sink  far  below  it  (forced  price,  or 
under-price).^    Such  hindrances  to  competition  depend,  in  part, 

^  Du7ioye>%  Liberie  du  Travail,  VIII,  ch.  4;  Rati,  Lelirbuch,  I,  §  15S. 

*  For  a  good  classification  of  monopolies,  see  Senior,  Outlines,  103  ft". 
Menger,  Grundsiitze,  I,  195,  shows  that  no  monopolist  can  arbitrarily  deter- 
mine the  extent  of  the  market  for  his  inonopolj-product  when  the  price 
is  fixed,  nor  when  the  extent  of  the  market  is  known,  the  height  of 
the  price.  Moreover,  the  price  may  remain  longer  above  than  under  the  cost 
of  production,  for  the  reason  that  it  is  easier  to  abandon  a  business  than  to 
begin  one,  and  that  the  fear  of  loss  is  more  frequently  an  incentive  to  action 
than  the  hope  of  gain.  Hence  the  price  of  corn,  when  everything  else  is 
\ery  dear,  is  more  apt  to  vary  from  the  average  price,  than  in  times  when 


Sec.  CXIL]  EXCEPTIONS.  320 

upon  natural  causes.  Thus,  in  the  case  of  the  works  of  art 
of  a  deceased  artist,  which  cannot  be  increased  in  number;- 
or  in  that  of  living  celebrities  who  cannot  extend  their  mental 
acti\ity  in  the  same  degree  that  their  reputation  has  grown. 
So,  also,  in  the  case  of  precious  stones,  which  are  sometimes 
found  free,  and  therefore  cost  nothing,  but  which,  at  the 
same  time,  have  a  high  price.^  Many  valuable  agricultural 
products  are,  together  with  their  production,  limited  to  a 
detinite  and  sometimes  very  small  district.*  It  is  to  be  re- 
garded as  a  modification  of  such  natural  monopolies  when  sub- 
stitutes for  a  kind  of  goods  which  diminish,  at  least  in  part, 
the  demand  for  them,  are  found,  at  a  cheaper  price;  for  in- 
stance, ordinary  table-wines  in  the  stead  of  fine  wines.  The 
rule  applies  much  more  strictly  to  those  goods  which,  on 
account  of  their  greater  quantity,  can  replace  inferior  ones,^ 
than  it  does  to  those  where  this  is  not  possible. 

everything  is  very  cheap.  For  instance,  the  Munich  prices  from  1750  to  iSoo 
sliow  tliat  its  highest  price  was  147  per  cent,  above,  and  its  lowest  47  per  cent, 
below  the  average  of  twenty  years.     (Ran,  Lehrbucli,  §  162,  1S2.) 

2  Chance  plays  a  great  part  here.  Thus,  Murillo's  Conception  which  Mar- 
shal Soult  had  oftered  several  times  for  150,000  francs,  but  in  vain,  was  sold 
in  May,  1S52,  for  586,000  francs.  Paul  Potter's  young  bull  at  the  Hague, 
which  cost  625  florins  in  174S,  was  valued  before  the  middle  of  the  nineteenth 
century  at  200,000  florins.     (Dethmar.) 

2  The  purchaser  resolves  to  do  so  because  it  would,  in  all  probability,  cost 
him  more  to  go  to  India  or  Brazil  in  search  of  precious  stones.  Besides  after 
the  working  of  the  Brazilian  mines  in  172S,  and  again  after  the  French  Revo- 
lution, the  price  of  diamonds  fell  greatly;  in  the  one  case,  from  an  in- 
crease of  the  supply,  in  the  other  from  a  decrease  of  the  demand.      (Ritto; 

VI,  355,  365-) 

■*  Thus,  the  Champagne  and  Johannisberg  grapes,  when  transplanted  to  the 
Crimea,  lost  most  of  their  native  taste.  On  China's  practical  monopoly  of 
tea  culture,  and  Ceylon's,  especially  in  its  southwestern  part,  of  cinnamon, 
at  least  so  far  as  the  peculiar  aroma  is  concerned,  compare  Rttier,  Erdkunde, 
VI,  123  ft".  The  small  deer  of  Angoi-a  no  sooner  leave  the  little  district  of 
Asia  Minor  to  which  they  belong,  than  they  are  in  danger  of  degenerating. 
(Revue  des  deux  Mondes,  May  15,  1S50.)  Indian  birds-nests  cost  no  more 
than  1 1  per  cent,  to  gather,  dry  etc.,  of  the  market  price.  (CrazifurJ,  East 
India  Archipelago,  III,  432  fl:'.;  Hogendorp^  Sur  I'lle  de  Java,  201.) 

*  Poor  material  for  fuel,  poor  day-laborer  work  —  dwellings,  medical  attend- 
ance.   (Mctigcr,  Grundsiitze,  I,  116.) 


330  CIRCULATION  OF  GOODS.  [B.  II,  Ch.  II. 

The  principal  cause  of  forced  or  under-prices  (Schlciider- 
frcise)  is  the  facility  with  which  the  product  deteriorates,  and 
must,  therefore,  find  a  quick  sale,  especially  when  its  storage 
or  transportation  is  attended  by  further  difficulties.^  But,  very 
durable  commodities  are  also  subject  to  under-prices,  and  es- 
pecially those  which  last  longest,  because  the  supply  of  them 
can  be  diminished  only  very  slowly.  Thus,  for  instance, 
houses,  in  a  declining  city.  Distress-prices  are  found  most 
usually  in  the  case  of  such  commodities  as  are  produced  with- 
out any  intention  to  produce  them,  as  for  instance,  rags  and 
excrementitious  substances.  The  more  the  mere  forces  of 
nature  preponderate  in  production,  the  less  can  the  supply 
be  increased  or  decreased  at  pleasure,  the  more  frequently,  as 
a  consequence,  do  we  find  monopoly-prices  and  under-prices. 
(Compare  §  131  ft'.)  Thus  the  production  of  wheat  is  invariably 
connected  with  the  order  of  the  seasons.  Between  seed-time 
and  harvest,  there  are  a  number  of  months  which  neither 
capital  nor  skill  can  shorten  to  any  extent.  The  cultivation  of 
land,  to  be  very  much  greater  and  more  lasting,  supposes  so 
many  conditions  precedent,  increase  of  live  stock,  buildings  etc., 
that  it  can  be  attained  only  after  a  series  of  years.  Hence  it 
happens  that  wheat,  much  more  than  manufactured  products, 
is  subject  to  oppressivel}''  high  prices  and  oppressivel}'^  low  ones, 
during  a  long  period  of  time.  No  matter  what  the  influence 
of  the  forces  operating  in  the  opposite  direction  may  be,  the 


^Thus  sea  fish,  oysters  etc.  were  formerly  much  cheaper  during  the  sum- 
mer than  during  the  winter,  at  Ostend  and  Scheveningen,  because  during 
winter  they  could  be  sent  to  a  distance.  At  Billingsgate  market,  in  the 
mackerel  season,  fish  cost  per  himdred  48  to  50  shillings  at  5  o'clock  in  the 
morning,  36  shillings  at  10  o'clock,  and  24  shillings  in  the  afternoon.  (H. 
Schidze^  Nat.-CEkonomische  Bilder  aus  England,  1S53,  241.)  In  the  Rhine 
country,  the  price  of  fruit  does  not  vary  so  much  as  in  Saxony,  because  it  is 
customary  there  to  employ  the  surplus  in  the  manufacture  of  cider,  of  pre- 
serves etc.,  thus  making  it  transportable  and  durable.  Frequently,  after  a 
very  abundant  crop  of  gi-apes  or  olives,  under-prices  prevail,  sometimes  on 
account  of  a  want  of  vessels,  cellar-room  etc. ;  they  must,  therefore,  be  sold 
rapidly. 


Sec.  CXIIL]  EXCEPTIONS.  331 

price  of  wheat  depends  most  largely  on  the  result  of  the  last 
crop." 

SECTION  CXIIL 

EXCEPTIONS. 

(co:s'nNUED.) 

Other  impediments  in  the  way  of  freedom  of  competition 
have  their  origin  in  social  conditions.  The  rule  governing 
prices  applies  only  where  the  vendor  and  purchaser  are  equal- 
ly ready  to  exchange.  But  in  every  case  in  which  the  pro- 
ducer carries  on  his  business,  not  for  the  sake  of  free  gain,  but 
simply  to  obtain  a  means  of  livelihood,  it  may  be  subject  to 
many  important  exceptions.^  The  richer  a  seller  is,  the  longer 
can  he  wait  for  a  favorable  opportunity  to  sell.  Thus,  for  in- 
stance, wheat  is  somewhat  lower  in  price  at  times  when  pay- 
ments are  universally  made  than  at  other  seasons  of  the  year, 
because  a  great  many  country  people  are  then  compelled  to 
sell.  Where  the  country  population  are  universally  needy,  it 
sinks  after  a  harvest  to  an  unusually  low  figure,  and  in  spring 
rises  again  ver}'-  high. 

Sometimes  price  is  aflected  by  the  agreements  of  the  pur- 
chaser or  seller,  but  most  readily  by  those  of  middlemen  be- 

''  Compare  Adam  Smithy  Wealth  of  Nations,  I,  ch.  7. ;  Tooke,  History  of 
Prices,  I,  97.  Furs  vary  very  much  in  price,  sometimes  300  per  cent,  in  a 
year,  because,  in  the  case  of  this  entirely  natural  product,  every  tiling  depends 
on  the  stores  of  them,  on  the  temperature  etc.  (McCulloch,  Commerc.  Diet., 
s.  \.)  On  the  other  hand,  the  price  of  coffee  usually  varies  only  after  periods 
of  a  number  of  years,  because  new  plantations  produce  only  after  a  lapse  of 
years.  (Ibid.)  Pigs  vary  much  more  than  cattle  in  price,  because  the 
former  may  be  made  ready  for  the  slaughter  house  in  one-third  of  the  time 
required  for  the  latter.     (Thaei\  Rationelle  Landwirthschaft,  IV,  374.) 

'  Thus  the  rent  of  farms,  where  a  numerous  proletarian  population  will  live 
exclusively  from  agriculture,  depends  on  scarcely  anything  but  the  number 
of  people  and  the  extent  of  the  land.  (J.  S.  Mill,  Principles,  III,  ch.  2.)  In 
retail  trade,  where  personal  want  comes  in  question,  prices  are  much  more 
subject  to  be  modified  by  small  circumstances,  than  in  wholesale  trade,  Avhero 
both  parties  are  only  intent  on  "  doing  business."  (J.  S.  Mill,  III,  ch.  i,  §  5. 
Tookc,  II,  72  f.) 


332  CIRCULATION  OF  GOODS.  [B.  II,  Cii.  II. 

tween  consumer  and  producer.'^  Customs  peculiar  to  whole 
classes  may  exert  the  same  influence,  and  such  customs  are 
especially  powerful  in  the  lower  stages  of  business  and  in- 
dustrial development.  They,  even  at  the  present  time,  take 
the  place,  frequently,  of  freedom  of  competition  in  retail  busi- 
ness, in  the  book  business,  and  in  the  determination  of  lawyers' 
and  doctors'  fees,  as  well  as  in  the  distribution  of  a  nation's 
income  among  the  three  great  branches  of  its  general  econ- 
omy,^ deciding,  instead  of  competition,  how  much  shall  go  to 
each.  Wherever  there  are  guilds,  communities,  castes  etc. 
W' ith  legal  privileges ;  wherever  there  are  difficulties  placed  in 
the  way  of  exportation  and  importation;  wherever  preemption 
rights  or  monopolies,''  in  the  strict  sense  of  the  word,  exist,  the 
leveling  ebb  and  flow  of  the  elements  of  production  may  be 
still  more  seriously  interfered  with.  Legislation  ^  of  this  sort 
injures  the  non-privileged  portion  of  the  population  more  than 
it  helps  the  privileged  portion.     (See  §  97./ 

The  word  tismy,  so  arbitrarily  used  in  every-day  language, 
should  be  admitted  in  science  only  to  designate  a  famine-price, 
fraudulenth^  and  intentionally  caused  or  intensified. 

■^  Hucksters,  butchers,  dealers  in  corn,  inn-keepers  etc.  A  remarkable  case 
where  Parisian  dealers  in  hare-skins  attempted  to  ruin  the  new  fashion  in 
silk  hats  bj  distributing  a  great  number  of  them  among  the  rabble,  at  mock- 
prices.  (Hermann,  ist  ed.,  91.)  The  author  witnessed  a  similar  but  unsuc- 
cessful attempt  in  Berlin  in  1S3S-39,  bj  the  tailors  against  the  so-called  Mac- 
intosh coat.  On  the  conspiracy  of  the  English  dealers  in  second-hand  goods 
against  auctions,  see  Athteneum,  Dec.  5,  1S63.  It  is  one  of  McCtdlocKs 
characteristic  exaggerations,  that  he  says  that  conspiracies  to  raise  the  price 
of  a  commodity  by  artificial  means,  are  broken  just  as  soon  as  they  begin  to 
obtain  their  object  by  the  interest  of  the  individual  members  to  profit  by  the 
advanced  prices.     (Edition  of  Adam  Smith,  Edinb.,  1S63,  p.  59.) 

3  J.  S.  Mill,  Principles,  II,  ch.  4. 

*  Monopolies  universally  prohibited:  L.  un.  C.  De  Monopol.  (IV,  59.)  Po- 
lice-order of  the  Empire,  154S,  tit.  iS. 

*  Privileges  which  the  purchaser  voluntarily  accords  to  the  seller  are  wont 
to  be  useful  to  both  parties.     (Hermann,  loc.  cit.  155,  158.) 

^  Besides,  guilds,  castes,  corporations  etc.  may,  when  the  vent  diminishes, 
produce  vinder-prices  as  readily  as  they  may  monopoly -prices  when  the  vent 
is  very  good.     (See  Adam  Smith,  Wealth  of  Nations,  I,  ch.  7. 


Secs.  cxiv."i     prices  fixed  by  government.  333 

SECTION   CXIV. 

PRICES  FIXED  BY  GOVERNMENT. 

No  power  can,  of  course,  fix  the  price  of  a  commodity  in 
the  long  run,  which  cannot  at  the  same  time  fix  the  relation 
of  supply  and  demand.  Hence,  set  prices  fixed  by  govern- 
mental authority  can  be  made  to  play  a  part  in  practice  only 
in  so  far  as  the}^  do  not  establish  a  price  in  opposition  to  the 
real  state  of  things,  only  to  the  extent  that  they  give  un- 
doubted expression  to  it  in  a  manner  in  harmony  with  natural 
conditions.  With  this  restriction,  set  or  fixed  prices  may,  in 
the  absence  of  real  competition,  which  can  always  best  deter- 
mine prices,  be  useful  to  both  parties;  otherwise  one  party 
would  at  one  time,  and  the  other  at  another,  profit  by  an  un- 
just advantage;  but  it  would  not  be  long  before  both  would 
suffer  from  the  perturbation  caused  thereby  in  all  commercial 
transactions.  How  pleasant  it  is  for  a  traveler  in  Switzer- 
land, or  even  in  Italy,  to  find  set  prices  established  there.^ 
Especially  where  competition  is  prevented  by  state  privileges, 
the  establishment  of  set  prices  by  the  state  for  the  protection 
of  the  public  may  be  necessary.^     It  is  more  difficult  to  fix  a 

'Thus,  for  instance,  the  traveler  who  wanted  to  cross  a  stream, -would  find 
himself  delivered  over  to  the  tender  mercies  of  the  ferry-man,  without  pro- 
tection of  any  kind  against  his  demands.  But  repeated  impositions  in  the 
matter  of  prices  would  have  for  efiect  to  bring  a  point  into  disrepute  as  a 
place  of  crossing,  and  would  induce  the  public  to  seek  another.  Similarly 
in  the  case  of  hackney-coachmen  and  carriers  in  large  cities,  and  in  that  of 
innkeepers,  at  hotels  and  postal  termini  etc. 

*  Fixed  prices  by  governmental  authority  were  soonest  attempted  after  bad 
harvests,  but,  indeed,  with  a  strange  ignorance  of  the  natural  grounds  of  the 
increase  in  price  of  bread-stufis.  Thus  in  the  time  of  Charlemagne.  (Cap- 
itul.  a,  805 ;  Baliiz,  I,  423.)  Similarly  in  the  case  of  other  articles  of  uni- 
versal necessity,  when  oppressively  but  necessarily  dear.  (See  §  175.) 
During  the  last  centuries  of  the  middle  ages,  -svith  their  multitude  of  actual 
monopolies,  and  at  the  beginning  of  the  modern  era,  fixed  prices  became 
more  and  more  general.  The  earliest  instance  in  the  history  of  England  of 
a  fixed  price  for  bread  was  in  120::  (v.  Raumcr,  Ilohenstaufen,  V,  372),  and 


334:  CIRCULATION  OF  GOODS.  [B.  II,  Ch.  IT. 

set  price  for  a  commodity  in  proportion  to  its  complexity  and 
to  its  variableness  in  quality;  and  where  there  are  different 
grades  of  quality  of  the  same  commodity,  and  the  transition 
from  one  grade  to  another  is  almost  imperceptible,  such  price 
is  easily  evaded.^     In  the  case  of  every  enterprise  carried  on 

in  1266,  51  Henrj  III.  The  earliest  in  Prussia  was  in  1393.  (Voigi, 
Geschichte  von  Preussen,  II,  659.)  Many  instances  of  fixed  prices  in  the 
Rliine  provinces  of  Austria  in  1530.  In  Mylius,  Corp.  Const.  Marcli,  V,  2, 
587  ff.,  we  find  an  ordinance  of  1653  fixing  prices  in  Berlin,  and  including  72 
industries.  There  is  a  very  complicated  system  of  fixed  prices  in  the  police 
ordinance  of  the  electorate  of  Saxony  of  1612,  and  in  the  decree  concerning 
the  coin  of  1822.  As  to  how,  in  Saxony  in  1578,  an  attempt  was  made  to 
ascertain  the  cost  of  the  production  of  shoes  by  shoemakers,  see  JoJi.  Faike, 
Gesch.  des  Kurf.  August  in  volkswirthschaft.  Beziehung,  1S6S,  252.  There 
was  an  enormous  extension  of  governmental  fixing  of  prices  under  Philip 
II.;  one  of  the  principal  causes  why  Castile  was  so  far  behind  Aragon  eco- 
nomically. (T(nvnsc)id,  Journey  through  Spain,  II,  221.)  Sometimes  these 
measures  were  adopted  to  prevent  distress-prices ;  as  in  Hochheim,  in  favor 
of  the  vintners.  (Becker,  Polit.  Discurs,  II,  1652.)  Tlie  predilection  especi- 
ally of  German  authorities  for  the  fixing  of  prices  by  governmental  power, 
in  the  sixteenth  and  seventeenth  centuries  is  ver^'  remarkable.  Thus  Luther, 
vom  Kaufhandel  und  Wucher,  1524;  Calvin,  Leben  Calvins,  by  He7iry,  II, 
Beilage,  3,  23;  Bornitz,  De  Rerum  Sufficientia,  1625,  246;  Sechcndorff,  Teut- 
scher  Fiirstenstaat,  5th  ed.,  1776,  210;  Becker,  II,  1823  ft";  Horncck,  Oester- 
rich  iiber  Alles,  wenn  es  will,  16S4,  123;  Leibniz  ed.  Dutens,  VI,  I,  250; 
Thomasius,  Gottl.  Rechtsgelahrtheit,  1709,  209;  even  Frederick  the  Great, 
Mylius,  N.  Corp.  Const.  March,  I,  190.  Similarly,  Mariana,  De  Rege  et 
Regis  Institutione,  III,  c.  9.  Compare,  however,  III,  c.  8,  and  Bacon,  Serm., 
15;  Historia  Henrici,  1037,  1040.  On  the  other  hand,  Ckild,  1690,  and  Nortk, 
1691,  reprove  all  such  measures.  Roscker,  Zur  Geschichte  der  englischen 
Volkswirthschaftslehre,  65,  90  f.  Earlier  yet,  Salmasius,  who  would  allow 
the  ix&&  fori  ratio  to  govern.  (De  Usuris,  163S,  5S3.)  For  a  very  rigorous 
price-tarriff  in  the  old  Indian  laws,  by  which,  inter  alia,  the  price  of  provis- 
ions was  to  be  fixed  anew  every  foiirteen  days,  see  Menu,  Laws,  VIII,  ch. 
401  ft". 

2  Where  trade  is  free,  the  filet  de  hoeuf,  for  instance,  is  worth  four  times  as 
much  as  the  flesh  of  the  ox's  neck  or  throat;  but  prices  fixed  by  a  govern- 
ment can  scarcely  take  cognizance  of  the  difference.  How  easily  might  not 
a  fixed  price  for  beer,  for  instance,  be  evaded  by  diluting  that  beverage  with 
water,  or  fixed  prices  for  inn-keepers  by  dealing  out  portions  smaller  in 
quantity  or  of  an  inferior  quality.  Moreover,  as  early  a  writer  as  De  la 
Court,  Polit.  Discoursen,  1662,  c.  4,  remarks  that  the  establishment  of  fixed 
prices  by  governmental  authority  raises  the  average  price  of  all  commodities 


Sec.  CXV.]  CIVILIZATION  ON  PRICES.  335 

by  many  in  common,  where  no  competition  is  possible,  it  is 
necessary  to  supply  the  defect  by  means  similar  to  the  estab- 
lishment of  fixed  prices;  as  in  the  case  of  government,  by 
fees  for  governmental  services,  and  the  cooperation  of  a  cham- 
ber of  deputies  in  the  imposition  of  taxes  and  the  determina- 
tion of  official  salaries  etc/ 

SECTION  CXV. 

INFLUENCE  OF  GROWING  CIVILIZATION  ON  PRICES. 

On  the  whole,  prices  become  more  and  more  regular  as 
national-economic  civilization  advances.  Progress  in  civiliza- 
tion tends  to  bring  the  parties  engaged  in  the  struggle  for  prices 
that  is  buyers  and  sellers,  nearer  to  one  another,  in  so  far  as  it 
uniformly  decreases  the  cost  of  production,  and  increases  the 
purchaser's  ability  to  pay.-^  (See  §101.)  The  more  universal  di- 
vision of  labor  makes  commercial  intercourse  more  necessary 
to  every  one,  at  the  same  time  that  it  makes  it  more  of  a  hab- 
it to  him;  and  hence  exchange  ceases  more  and  more  to  be  a 
matter  of  caprice  or  chance.  The  better  means  of  transpor- 
tation and  communication  render  it  easier,  in  every  way,  for 
supply  and  demand  to  meet.  With  the  advance  of  general  en- 
lightenment and  education,  an  acquaintance  with  commodities 
also  becomes  more  general,  and  every  purcliaser  is  on  a  bet- 
ter way  to  be  able  to  estimate  the  cost  of  production  which  the 
seller  has  to  bear.    Hence,  fraudulent  prices  and  prices  founded 

rather  than  lowers  it,  for  the  reason  that  the  few  who  are  sellers  bj  trade 
can  do  more  to  influence  the  authorities  than  the  many  buyers,  whose  inter- 
ests are  divided  among  numberless  different  commodities. 

*Schdffle,  Nat.-CEkonomie,  II,  384  f. 

^  13 at! f eld,  Organization  of  Industry,  120.  "Where  the  economic  life  of  a 
people  is  still  undeveloped,  and  the  production  of  one  enterprise  is  not  from 
the  first  based  on  the  estimated  consumption  of  another,  the  circulation  of 
goods  brings  with  it  great  profits  and  great  losses ;  Avhereas,  profits  and  losses 
grow  smaller,  but  at  the  same  time  more  uniform  and  regular,  in  proportion 
as  the  circulation  of  goods  increases  in  rapidity  and  regularity.  (Siei/i,  Lehr- 
buch,  212.) 


336  CIRCULATION  OF  GOODS.  [B.  II,  Ch.  II. 

in  error  become  less  frequent ;  and  all  this  is  helped  forward 
by  the  greater  accuracy  of  weights  and  measures.  The  in- 
crease of  population  makes  competition  more  active  in  all 
branches  of  trade,  while  at  the  same  time,  with  the  greater 
freedom  of  circulation,  a  number  of  causes  which  previously 
operated  to  produce  very  high  prices  in  one  place  and  very  low 
ones  in  another  are  removed.^  But  especially,  the  growth  of  a 
distinct  class  of  merchants  leads  to  a  uniformit}^  in  price.  This 
class  are  incited  by  their  own  interest  to  purchase  at  low  prices 
and  sell  at  high  prices.  Thus,  their  competition  in  the  former 
case  raises  prices,  and  lowers  them  in  the  latter.^  In  all  low- 
er stages  of  civilization,  the  custom  of  making  offers  and  beat- 
ing down  in  price  pla3^s  a  great  part,  while  where  culture  is 
higher,  the  system  of  fixed  prices  (but  not  by  government) 
gains  ground  continually.  Here  Turgot's  principle  is  appli- 
cable, viz.:  that  the  current  price  of  an  article  is  tacitly  under- 
stood when  one  asks  a  merchant  the  price   of   his  wares.* 

2  In  Belgium,  during  the  last  forty  years,  the  price  of  wheat  has  become 
more  constant  every  year,  while  the  price  of  rye  has  become  more  variable; 
for  the  reason  that  rye  has  gradually  ceased  to  be  an  article  of  popular  con- 
sumption, and  therefore  to  be  an  important  article  in  trade,  and  is  consumed 
almost  entirely  and  directly  by  its  producers.  (Horn,  Statist.  Gemalde  von 
B.,  1S53,  185.)  Rodbertus  rightly  conjectures  that  the  price  of  wheat  was 
much  more  variable  in  ancient  times  than  it  is  with  us.  (Hildcbra7id''s 
Jahrb.,  1S70,  I,  36.)  That  it  was  so  may  be  inferred  from  the  surprisingly 
large  family  supplies  which  were  laid  in,  as  appears  from  Digest,  XXXIII, 
De  Penu  legato. 

3  In  Wiirtemberg  even  officials  etc.  buy  their  own  wine  almost  always  direct- 
ly from  the  vintner.  This  causes  prices  there  to  be  exceedingly  variable,  fre- 
quently from  hour  to  hour.  (y.  Redcti,  Statist.  Zeitschrift,  Nov.  1847,  1008.) 
How  greatly  the  mere  presence  of  a  regular  market  has  contributed  to  make 
prices  more  constant,  may  be  seen  in  the  suburbs  of  Hamburg,  Avhere  fish 
offered  for  sale  on  the  street  are  sold  in  the  evening  for  one-third  of  the  price 
asked  for  them  in  the  morning.  Besides,  purchases  made  with  a  view  to  spec- 
ulation may  increase  the  variations  of  price,  if  the  speculation  is  unskillfuUy 
conducted,  especially  when  a  low  rate  of  interest,  and  of  the  profit  of  the 
person  engaged  in  it,  has  produced  a  blind  race  among  the  speculators. 
Here  the  price  of  a  commodity  rises,  not  from  any  natural  cause,  but  because 
it  once  rose  before,  and  vice  versa.     (Senior,  Outlines,  17  ff;  Hermann,  90  ft") 

*  That  fixed  prices  suppose  that  men  are  engaged  in  the  production  of  the 


Sec.  CXV.J  CIVILIZATION  ON  PRICES.  337 

This  proposition  is  tnie  in  the  case  of  individuals,  as  well  as  of 
classes  and  of  whole  nations.''  It  is  plain,  that  under  a  system 
of  fixed  prices  we  can  more  certainly  discover  wliat  the  equit- 
able price  is,  than  in  the  heat  of  higgling  which  besides  con- 
sumes a  great  deal  of  precious  time.  Lastly,  one  of  the  princi- 
pal requisites  of  a  well  developed  scale  of  prices  is  national  hon- 
or, and  this,  doubtless,  increases  in  the  higher  stages  of  civiliza- 
tion, not  only  because  of    the  greater  moral  culture  which 

commodity  in  question,  as  their  calling  in  life,  see  Garve^  Zu  Cicero's  Pflich- 
ten,  III,  64  fl'.  Chess-like  commerce  of  colporteurs,  and  in  caravans  etc. 
Concerning  the  dreadful  higgling  of  the  Bedouins,  see  Wdhtcd,  Reise  in 
Arabien,  Rbdigcr\'i  translation,  I,  147;  and  the  still  ^vorse  bantering  in  Cash- 
mere, -where  the  merchant,  in  the  first  place,  always  denies  that  he  possesses 
the  desired  commodity,  then  begins  to  search  for  it,  in  order  to  discover  what 
value  the  purchaser  puts  upon  it  etc.  (K.  Ritter,  Erdkunde,  m,  475.)  On 
the  practices  in  Indian  fairs,  see  Th.  Skinner^  Excursion  in  India,  1S33,  I,  ch. 
6;  on  the  bazaars  in  Asia,  Andree,  Globus  XII,  7,  211.  Herberstein  says  of 
the  Russians  in  the  sixteenth  century :  mercantur  fallacissime  et  dolosissime 
ncc  ^aucis  verbis  .  .  .  7nercatores  nonnunquam  non  uno  tantum  ant  alter' o 
vtcnse  sicspensos  deiitic7it,  verum  ad  extremam  dcspcrationem  ferducere  solent. 
Hence  the  great  variations  in  prices  and  commodities.  (Rerum  Moscov. 
Commentt.,  ed.  Starczewski,  39  f)  Similarly  also,  in  1674,  according  to  KiU 
burger:  BUsching's  Magazin,  III,  249.  But,  on  the  contrary,  it  is  said  of 
the  Plescovers,  educated  by  intercourse  with  the  Hanse;  tanta  integritas 
.  .  .  in  conirach'bus,  ui  nno  tantum  verba  res  ifsas  indicareni  omni  verbosi- 
tatc  in  frattdcm  emptoris  omissa.  (Herberstein^  52.)  In  the  England  of  the 
present  day,  the  custom  of  marking  each  piece  of  goods  Avith  its  price  is  very 
general.  Concerning  the  rapidity  and  the  paucity  of  words  with  which 
prices  are  settled  in  that  country,  where  business  men  do  not  even  salute  their 
customers,  nor  customers  the  business  man,  see  C.  G.  Simon,  Observations 
recueillies  en  Angleterre,  1835,  I,  129  f.  The  Athenian  laws  (.-*), that  fixed 
prices  should  be  asked,  and  that  sellers  should  not  sit  down  that  that  they 
might  sell  more  rapidly,  points  to  something  similar.  (Aiheri.,  VI,  226  f. 
Plato,  De  Legg.,  XI,  916  f.)  Athenian  law  prohibiting  mendacity  in  the 
markets.     (See  DemostJt.,  Lept.,  459.) 

'  Thus  the  German  book-trade  has  fixed  prices.  Many  merchants  never 
make  an  offer  to  their  educated  customers  who  are  wont  to  do  so  with  peas- 
ants etc. ;  because  they  are  aware  that  tlie  latter  purchase  only  after  they 
have  compelled  the  seller  to  come  down  greatly  from  his  first  proposed  price. 
Among  the  Quakers  it  has  been  a  rule  from  the  beginning,  never  to  ask  more 
for  their  wares  than  they  were  determined  to  accept.  (Hume,  History  of 
England,  ch.  62.) 
Vol.  1. — 22 


338  CIRCULATION  OF  GOODS.  [B.  II,  Ch.  II. 

then  prevails,  but  also  and  especialty  because  that  which  con- 
stitutes a  people's  real  and  best  interests  is  better  understood." 
Among  declining  nations,  many  of  these  developments  take  a 
retrogressive  road.  The  very  great  distinction  between  rich 
and  poor,  between  educated  and  uneducated,  again  produces 
great  fluctuations  in  price.  A  proletarian  people  who  have 
sunk  so  low  as  to  live  on  potatoes  will  suffer  much  more  from 
variations  in  price  and  of  the  means  of  subsistance  than  a 
people  who  live  on  wheat ;  for  the  reason  that  it  is  so  diflicult 
to  export  or  to  preserve  '^  potatoes.  Nor  can  it  be  doubted,  that 
the  greatest  possible  constancy  of  prices  is  the  most  beneficial 
condition  that  the  general  economy  of  a  people  can  be  in. 
Where  prices  change  while  the  cost  of  production  remains  the 

^  Sir  William  Temj>le,  Observations  upon  the  Netherlands,  Works  I,  134, 
compares  honor  in  trade  to  diseipline  in  an  army.  Similarly,  Latv,  Trade 
and  Money,  209  f.  Ferguson^  History  of  Civil  Society,  III,  4.  Where  the 
seller  is  not  obliged  to  make  known  the  existence  of  certain  defects  in  his 
wares  to  the  purchaser  before  sale,  there  is  always  scope  for  fraud.  Com- 
pare Digest  De  Edict,  aedilit.,  XXI,  I.  On  the  meaning  of  the  German 
legal  maxims :  Hand  muss  Hand  ivahren^  and  Ein  JVorf,  ein  Mann^  see 
£/5e«//ar/,  Deutsches  Recht  in  SpriichwOrtern,  311  f.,  319  f.  It  is  a  principle 
in  matters  of  business,  that  the  person  who  through  malice  or  carelessness 
recommends  a  man  of  whose  probity  there  is  already  some  doubt,  should 
bear  the  damage  caused  by  his  recommendation.  (Martens,  Grundriss,  des 
Handelsrechtes,  24  fF.)  Many  attempts  at  dishonesty  are  prevented  by  laws 
which  in  important  contracts,  especially  in  sales  of  land  etc.,  require  the 
presence  of  witnesses,  and  this  particularly  in  the  lower  stages  of  civiliza- 
tion. {Meier  and  ^c/zow^ww,  Attischer  Process,  522;  Roman,  Emancipatio; 
Grimm,  Deutsche  Rechtsalterthiimer,  608  f.),  or  even  a  public  proclamation 
before  the  assembled  community,  at  least  written  documents  invested  with 
all  legal  formalities  as  practiced  among  civilized  peoples.  On  Greek  laws  of 
this  nature,  see  especially,  Theophrast.,  in  Siobaeus,  Sermon.,  XLIV,  22.  Very 
remarkable  in  Sparta.     Schol.  Aristopkan.,  Aves,  12S4. 

''Compare  Lotz,  Revision,  I,  255  fi".  In  England  the  price  of  wheat  scarce- 
ly ever  varied  more  than  from  i  to  2.  In  Ireland  the  price  of  potatoes  var- 
ied from  I  to  6.  (McCtdloc?/,  Comm.  Diet.,  v.  Potatoes.)  Compare  Engcl, 
Jahrbuch  fiir  Sachsen,  I,  491  ff.  The  custom  of  asking  enormous  prices 
with  the  expectation  of  being  beaten  down,  is  usual  in  Italy  and  carried  to  a 
frightful  extent,  and  related  to  the  bad  custom  prevalent  there  of  begging  a 
little  after-payment  to  every  little  gratuity  or  drink-money  which  has  been 
received. 


Sec.  CXV.]  CIVILIZATION  ON  PRICES.  339 

same,  one  person  can  only  gain  what  the  other  has  lost.  But 
such  unmerited  crains  and  undeserved  losses  have  an  invari- 
able  tendency  to  destroy  the  deepest  roots  of  a  people's  eco- 
nomic activity ;  and  intentional  speculation  based  upon  such 
change  usually  assumes  an  immoral  character,  (Stock-job- 
bing./ Even  if  Macleod  be  right,  that  an  increase  or  decrease 
in  prices  is  to  be  regarded  as  a  warning  of  excess,  the  former 
of  excess  of  consumption,  the  latter  of  production,  no  one  will 
doubt  that  it  is  the  interest  of  every  organism  to  confine  pain 
within  the  smallest  possible  limits,  even  if  its  consequences 
are  so  beneficial  to  the  preservation  of  the  whole  body. 

^Storck,  Handbuch,  I,  311.  5^.  B.  ^oy,  Traite  I,  ch.  16.  As  to  how  com- 
merce, when  fully  developed,  is  wont  to  be  more  moral  than  when  only 
half  developed,  see  Garve,  loc.  cit.,  and  Versuche  IV,  149  if.  How  fortunate 
for  the  public  economy  of  nations  that  the  prices  of  corn  especially  have 
been  growing  more  steady  all  the  time  since  the  middle  ages.  See  Jiosc/ier, 
Ueber  Kornhandel,  56,  6i. 


340  CIRCULATION  OF  GOODS.  [B.  II,  Ch.  III. 


CHAPTER  III. 

MONEY  IN  GENERAL. 


SECTION  CXVI. 

INSTRUMENT  OF  EXCHANGE.    MEASURE   OF  VALUE. 
BARTER. 

Wherever  the  division  of  labor  is  very  highly  developed, 
the  continuance  of  barter,  or  the  direct  exchange  of  one  ob- 
ject of  consumption  for  another,  presents  difficulties  well  nigh 
insurmountable.  How  difficult  it  would  be  always  to  find  the 
person  who  could  supply  us  with  precisely  what  we  wanted, 
and  at  the  same  time  have  need  of  what  we  had  a  surplus 
of .^     But  how  much  less  frequently  would  it  happen  that  one's 

'  Trade  by  barter  was  very  general  in  several  states  of  the  American  Union 
about  the  close  of  the  eighteenth  century.  In  Vermont,  for  instance,  it  was 
usual  for  a  doctor  to  exchange  his  medicines  against  a  horse,  and  for  the 
prmter  to  buy  corn,  butter  etc.  with  a  newspaper.  (Ebeling^  Geschichte  und 
Erdbeschreibung,  II,  537.)  In  Maryland,  the  Assembly  fixed' by  law  the  rel- 
ative proportions  at  which  tobacco,  pork,  corn  and  wheat  should  be  ex- 
changed the  one  against  the  other.  (Ebeling,  V,  435  ff.  Douglas,  Summary 
of  the  British  Settlements  in  N.  America,  1670,  V,  2,  359.)  Even  as  late  as 
1815,  children  were  wont  to  run  the  streets  of  Corrientes,  crying:  "  Salt  for 
candles,  tobacco  for  bread  etc."  It  was  commerce  with  England  that  first 
led  to  trade  by  money  in  the  United  States.  (Robertson,  Letters  on  South 
America,  1843,  I,  52.)  Similarly  in  Rhokand  until  the  end  of  tlie  eighteenth 
century,  where  the  cities,  as  a  consequence,  presented  the  appearance  of  a 
fair  the  whole  year  round.  In  the  beginning  of  this  century,  the  khan  in- 
troduced the  use  of  copper  money  made  from  Persian  cannons;  and  much 
later  yet,  there  were  scarcely  a  million  rubles  in  money  to  a  million  men. 
(Ritter,  Erdkunde,  VII,  753.)  Basil  Hall  found  the  uncivilized  inhabitants 
of  the  Loo-Choo  Islands  ignorant  of  the  use  of  money.     (Voyage  of  Dis- 


Sec.  CXVI.]         INSTRUMENT  OF  EXCHANGE  34X 

want  and  another's  surplus  would  coiTCspond  exactly  the  one 
to  the  other  in  quantity ;  that,  for  instance,  the  manufacturer 
of  nails,  desirous  of  exchanging  his  nails  for  a  cow,  should 
meet  a  cattle-dealer  who  should  want  exactly  as  many  nails 
as  a  cow  is  worth !  Here  there  is  one  chief  difficulty  in  the 
way,  viz.:  that  there  are  so  many  commodities  which  cannot 
be  divided  without  causing  a  dimunition  or  even  a  destruction 
of  their  value ;  and  that  others  cannot  be  stored  away  in  any 
quantity  without  becoming  a  very  heavy  burthen  to  their 
owner.  How  useful  it  would  therefore  be,  if  there  was  one 
commodity  which  should  be  acceptable  to  every  person,  at  all 
tin>es,  especially  if  in  addition  to  this,  it  possessed  the  qualities 
of  durability,  capacity  for  transportation  and  for  being  stored 
up  and  preserved.  Any  person  who  possessed  a  proper  supply 
of  this  one  commodity  would  then  be  certain  of  being  able  to 
obtain  all  other  exchangeable  commodities  through  its  instru- 
mentality; and  every  seller  would  be  satisfied  to  exchange 
what  he  had  to  dispose  of  against  this  "  universal  commodity." 
If  two  values  are  equal  to  a  third,  they  are  equal  to  each 
other.  It  is,  therefore,  a  simple  matter  to  use  this  most  cur- 
rent of  all  commodities,  with  which  all  others  are  most  fre- 
quently compared,  as  a  measure  of  the  relative  values  of  all 
other  exchangeable  commodities.  There  is  need  of  such  a 
measure,  and  it  is  analogous  to  the  want  experienced  by  the 
mathematician  who  has  a  column  of  fractions  to  sum  up,  and 
who  does  it  by  first  reducing  them  all  to  a  common  denomi- 
nator.    (Storch.)  ^     A  person  entrusted  with  the  duty  of  as- 

covery,  1S18.)  Concerning  h-ade  by  barter  in  the  Homeric  age,  see  the  Iliad, 
VII,  472  ff.  A  supposed  law  of  Lujcurgus  prohibited  the  use  of  money  in 
purchases,  and  allowed  barter  only.  (Justin.,  Ill,  2.)  According  to  Pau- 
sail.,  Ill,  12,  only  barter  existed  in  India  (.?)  in  his  time. 

2  The  person  who  has  been  used  to  paying  for  four  pounds  of  meat  with 
twenty  pounds  of  bread,  and  is  asked  to  give  twenty  pounds  of  bread  in  ex- 
change for  some  other  article,  must  of  course  have  some  unit  of  measure  in 
his  mind  to  serve  as  a  means  of  comparison  between  the  value  of  that  article 
and  that  of  four  pounds  of  meat.  In  Denmark,  during  the  rule  of  the  aris- 
tocracy, there  were  fixed  prices  sanctioned  by  the  tradition  of  long  usage,  in 


342  CIRCULATION  OF  GOODS.  [B.  II,  Cii.  III. 

sessing  the  values  of  two  hundred  different  articles  would  be 
obliged,  if  he  had  no  such  measure  to  use,  to  burthen  his 
memory  with  at  least  19,900^  different  ratios.  With  it,  he 
need  carry  only  199  in  his  head. 

Such  a  commodity,  universally  in  favor,  and  which,  on  that 
account,  is  employed  as  an  intermediary  in  the  effecting  of 
exchanges  of  the  most  varied  nature,  in  the  measuring  of  all 
exchange-values  and  as  a  value-carrier  ( Werthtr'dger)  in 
time^  and  space,  we  call  money.  (Merce  tmiversale:  Berri; 
'produit prefer e :  Ganilh;  marchandise  inte7'mediare :  Bastiat.)^ 

accordance  with  which  the  prices  of  all  commodities  were  estimated  in  rela- 
tion to  a  ton  of  barlej'  or  rye  —  a  natural  consequence,  apparently,  of  the 
want  of  a  common  measure  to  govern  in  the  greater  number  of  transactions. 
Bergsoe,  Archiv  der  Polit.  CEk.,  IV,  314;  Gratigaii's  Icoiandic  Code  contains 
a  remarkable  fixed  price  of  this  nature  in  the  supplement  to  the  Kaiij>a-Balkr 
or  Commercial  Code,  I,  p.  500.  Similarly  among  the  ancient  Persians. 
Reynier^  Economic  publique  des  Perses,  30S. 

200  X  f200 l) 

3  That  is, -^ -•    Compare  Rau  in  Storch,  Handbuch,  III,  253.    The 

"  at  least "  has  reference  to  the  fact,  that  in  barter,  the  many  different  kinds 
of  most  commodities  has  to  be  borne  in  mind.  (Kiiics,  Geld  und  Credit, 
I,  218.) 

*  This  ti-ansportation  of  values  supposes  an  equality  of  values  of  the  inoney 
in  two  places,  while  the  transportation  of  goods  supposes  different  values  of 
the  same  kind  of  goods  in  both  places.     (Knies,  Geld  und  Credit,  I,  218.) 

*  While  the  words  j>ecunia,  danarOy  dinero,  and  argent,  are  all  derived  from 
unessential  qualities,  the  German  word  for  money,  Geld,  corresponds  with 
the  essential  quality  of  money,  since  it  denotes  that  which  is  of  value  every- 
where (gilt).  On  the  other  hand,  niimnms  and  VOfjicopLa  from  VOp.O(;, 
(Bceckh.  Meti-olog.  Unters.,  310.),  moneta  (the  English,  money),  are  from 
the  temple  of  Juno  Moneta,  in  which  the  Roman  coins  were  for  a  long  time 
stamped.  In  old  German,  the  word  for  money.  Geld,  means  everything  that 
is  paid  by  any  one.  (Grimm,  D.  Rechtsalterth.,  382.)  The  present  meaning 
of  the  word  is  to  be  met  with  in  a  very  old  document  of  1327.  (Arnold,  z. 
Geschichte  des  Eigenthums  in  den  deutschen  Stadten,  89.) 

5  The  wrong  definitions  of  money  may  be  divided  into  two  classes :  those 
which  convey  the  idea  that  it  is  more  than  a  commodity,  and  those  which 
imply  that  it  is  less. 

This  was  a  point  which  was  contested  even  among  the  Greeks.  There 
were  many  who  claimed  that  wealth  consisted  exclusively  in  the  possession 
of  much  money ;  as  we  find,  for  instance,  in  the  pseudo-Platonic  dialogue 
Eryxias ;  while  others  insisted  that  money  was  something  purely  imaginary 


Sec.  CXVL]  INSTRUMENT  OF  EXCHANGE.  34.3 

The  more  enlightened   portions  of   every  business   com- 
munity gradually  come  to  require  payment  in  the  commodit}' 

(^?.7jOO^^,  and  the  creation,  exclusively,  of  hunian  laws.  (ArisioL,  Polit.,  I, 
3,  16,  Schn.)  Nofxcajxa  aofifioloi'  r^c  oJMiyy^:;  iusxa.  (Plato,  De  Rep., 
II,  371.)  Anacharsis  compares  money  to  counters.  (Plutarch,  De  Profectt. 
in  Virtute.)  Aristotle,  himself,  subscribed  to  the  second  opinion,  although  he 
saw  clearly,  that  only  useful  and  current  things  {^qdav  S.\)llzZO.'/tlotazov 
7:00^  TO  t^p)  could  be  used  as  money.  (Polit.,  1,  3,  14  ff.  Eth.  Nicom., 
V,  5,  6,  Rhet.,  II,  1 6.)  Xenophon  ascribed  properties  to  money  which  no 
other  commodity  possessed;  especially  when  he  said  that  it  could  never  be 
too  plentiful,  and  ihat  its  price  could  never  fall.  (De  Vectt.  Ath.,  4.)  The 
finest  ancient  explanation  of  the  nature  df  money  is  that  of  the  jurisconsult 
Paullus,  L.  I ;  Digest,  XVIII,  i ;  and  it  well  deserves  the  long  commentary 
devoted  to  it  by  P.  Neri,  Osservazioni  etc.,  in  Custodt,  P.  A.,  VI,  324,  ft". 

Among  the  moderns,  Melandhon.,  Corp.  Ref.,  XVI,  49S,  and  Seb.  Frank, 
Chronik.,  760,  consider  money  as  a  mere  symbol.  On  the  other  hand,  the 
over-estimation  in  which  the  precious  metals  were  held  by  the  adherents  of 
the  Mercantile  System  was  owing,  without  doubt,  to  their  very  superior  util- 
ity as  money ;  for  we  very  frequently  find  that  the  adherents  of  that  school 
insist  that  the  precious  metals  must  circulate.  (See  §  9  and  §  210.)  v. 
Schroder,  Fiirstl.  Schatz  -  und  Rentkammer,  1 1 1  f.,  considers  new  copper 
coins  as  an  increase  of  the  national  wealth,  but  not  other  copper  which  is 
merely  a  commercial  commodity.  He  frequently  calls  money,  the  pendulum 
aommercii,  and  expresses  ideas  concerning  it  as  enthusiastic  as  they  are  ob- 
scure (p.  86.)  Horncch,  in  his  Oesterreich  iiber  Alles  w-enn  es  will,  1864, 
calls  gold  and  silver  "  our  best  blood,  the  very  marrow  of  our  sti-ength,"  and 
"  the  t\v;o  most  indispensable  universal  instruments  of  human  activity  and 
existence."  (p.  iSS.)  Th.  Mun,  England's  Treasure  by  forraign  Trade,  1664, 
(ch.  2)  considers  cash-money  and  resources  as  synonymous  in  every  way. 
Only,  he  says  (ch.  4)  that  it  is  sometimes  advisable  to  allow  one's  money  to 
remain  in  foreign  countries,  and  to  use  bills  of  exchange,  banks  etc.,  at  home, 
as  a  substitute,  y.  Gee,  Trade  and  Commerce  of  Gr.  Britain,  edition  of  173S, 
laments  the  "  stift'-necked  folly  of  those  who  think  money  a  commodity  like 
any  other."  It  is  one  of  the  most  common  demands  of  the  adherents  of  the 
Mercantile  System  that  the  home  mines  of  gold  and  silver  should  be  v/orked 
at  no  matter  what  sacrifice,  since  the  money  employed  in  working  them  con- 
tinues to  remain  in  the  country  and  the  newly  coined  precious  metal  is  clear 
gain.  Compare  Schroder,  loc.  cit.  109  ff.,  181.  Ilorncck;  loc.  cit.  173.  Brog- 
gia,  Delia  Monete,  1743,  cap.  33;  v.  Justi,  Staaatswirthschaft,  I755,  I,  246: 
Forbonnais,  Finances  de  France,  175S,  I,  14S.  Ulloa,  Noticias  Americanas, 
1772,  ch.  12.  We  seldom  meet  -with  the  correct  view  on  this  subject  in  the 
seventeenth  century.  Sully,  of  whom  Henry  IV.  said  that  he  never  found 
anything  to  be  possessed  of  beauty  which  cost  double  its  real  value,  had  it  at 


34i  CIRCULATION  OF  GOODS.  [B.  II,  Ch.  Ill, 

which  has  for  the  time  being  the  greatest  circulating  capacity. 
If  to  this  be  added  the  sanction  of  the  government,  and  if  the 

times.     (Economies  royales,  LXXIII.)      So  had  v.  Seckendorff,  Teutscher 
Fiirstenstaat,    1655,  5th  edition. 

It  is  in  accordance  with  the  usual  course  of  human  development  that  the 
exaggerations  of  the  Mercantile  System  led  to  a  reaction  characterized  by  an 
exaggeration  in  the  opposite  direction.     Even  Davanzati,  Sulle  Monete,  15SS, 
traces  the  value  of  money  back  to  human  convention  and  refuses  to  find  it 
in  nature.     A  natural  calf,  he  thinks,  is  ^iu  nobile  than  a  golden  one ;  al- 
though he  elsewhere  expresses  his  admiration  of  the  precious  metals,  calls 
them  ca^ioni  seconde  delta  vita  beata,  and  lauds  them  because  they  procure 
us  tutVessi  bent  (20,  21,  Cust.)     Montanari  (ob.,  1687)  demonstrates  from  the 
use  of  leather  money  etc.,  that  the  authority  of  the  state  is  the  only  power 
which  gives  money  its  character  as  money.     (Delia  Moneta,  35.)     Davenant 
(ob.,  1714)  carries  his  inclination  to  call  money  "the  servant  of  trade,  meas- 
ure of  trade,"  so  far  as  to  compare  it  to  a  ticket  or  counter.     (Works,  I,  355, 
444.)     Strongly  as  Laiv^    himself,    opposes  the  convention  theory    (Trade 
and  Money,  ch.   i;    Sur  1'  Usage  des  Monnaies,   1720,  p.  1.),  his  disciple 
Dutot,  in  his  Reflexions  polit.  sur  le  Commerce  et  les  Finances,  1738,  905, 
ed.  Daire,  contrasts  not  only  paper  money  but  also  gold  and  silver  as  repre- 
sentative wealth,  with  real  wealth.    Berkeley,  Querist,  1735,  teaches  that  the 
real   notion   of  money  is   not   that  of  a   "  commodity,  standard,   measure, 
pledge,  but  [No.  23]  ticket  or  counter,  entitling  to  power  and  fitted  to  record 
and  transfer  such  power."     (441,475.)     Even  if  the  names, //we,  shilling  etc., 
remain,  and  the  metal  is  dropped,  evei-y  article  may  still  as  well  as  before  be 
counted  and  sold,  industry  promoted  and  the  course  of  commerce  preserved. 
(p.  440.)     According  to  Montesquieu,  Esprit  des  Lois,  XXI,  22,  gold  and  sil- 
ver are  a  ricliesse  de  fctiott  ou  de  signe.     Compare  Lettres  persanes,  II,  18. 
Benjamin  Franklin  also  maintains  that  the  value  of  gold,  for  instance,  is 
principally  a  credit-value.     Remarks  relative  to  the  American  Paper-Money, 
1765,  Works,  II,  Sparks'  edition.     Forhomiais,  Finances  de  France,  I,  86  f, 
calls  money,  simply  a  means  to  put  commodities,  which  alone  have  value 
origmally,  in  circulation.     Hence  it  is,  in  itself,  a  matter  of  indifierence 
whether,  for  a  given  quantity  of  coin,  a  person  gives  one  thaler,  or  ten.     In 
the  Elements  de  Commerce,  I,  11,  II,  67  ff.,  he  draws  a  distinction  between 
richesses  naturelles  (raw  material),  artificicllcs  (manufactured  products),  and 
ricliesses  de  convention  (money.)     von  Schlozer,  Aufangsgriinde,   1805,  100, 
138,  calls  money  somethmg  imagined;  and   Th.  Smith,  Essay  on  the  Theory' 
of  Money  and   Exchange,  1807,  asserts,  that  true  money  is  only  an  ideal 
ineasure   of  value,  of  which   coins   in   turn  are  only  the  representatives. 
Compare,  however,  Edinb.  Review,  Oct.,  1808.     Oppe7iheim,  Die  Natur  des 
Geldes,  1855,  grants  that  in   the  beginnings  of  trade,  money  possessed  the 
character  of  a  commodity;  but  says  tliat  as  soon  as  the  services  of  circula- 


Sec.  CXVI.]  INSTRUMENT  OF  EXCHANGE.  345 

government  itself  recognizes  this  same  "  universal  commodity" 
as  the  means  of  payment  of  all  debts,  or  as  "  legal  tender" 

tion  of  the  money-commodity  prevailed  over  its  services  in  consumption,  it 
lost  all  its  importance  for  the  latter  purpose,  and  that  all  relations  dependent 
thereon  ceased.  At  present,  he  claims  money  is  only  the  representative  of 
commodities,  but  no  commodity  itself.  See,  on  the  other  hand,  Roscher's 
critical  analysis  in  the  Literarisches  Centralblatt,  1855,  December. 

The  true  doctrine  was  advocated  in  a  classic  form  by  Nicolaiis  Oresmiiis 
(ob.  13S2).  See  his  Tractatus  dc  Origine  et  Jure  nee  non  ct  Ivlutationibus 
Monetarum,  newly  edited  by  Wolov:ski:  Paris,  1864.  See  Roscher^s  essay  in 
the  Comptes  rendus  of  the  Acadvimie  des  Sciences  morales  et  politiques,  vol. 
dz^  435  If.  Based  on  the  latter  we  have  Gabr.  Bid  (ob.  1495),  Dc  Monetarum 
Potestate  simul  et  Utilitate,  1542,  and  G.  Agricola^  De  Re  metallica,  1556,  I, 
4  fi.  This  true  doctrine  was  acclimated  earliest  in  England  and  Holland,  and 
before  the  mercantile  system  invaded  them.  Compare  Ilobbes,  Leviathan, 
24,  in  which  the  concoctio  honorum  is  described  by  means  of  money,  and  the 
full  and  clear. chapter  I3  of  Salmasius,  De  Usuris  (1630J,  who,  among  other 
things,  shows  how  Midas,  who  turned  everything  into  bread,  died  of  thirst. 
Petty  shows  very  clearly  that  national  wealth  does  not  consist  exclusively 
nor  mainly  in  money.  Every  country,  he  says,  needs  a  certain  quantity  of 
money  to  carry  on  trade.  It  would  be  a  waste  to  increase  the  former,  the 
latter  remaining  the  same.  But  the  precious  metals,  by  reason  of  their  dura- 
bility and  universally  recognized  value,  possess  the  character  of  wealth  in 
a  higher  degree  than  other  commodities. 

On  the  whole,  the  use  of  money  in  a  nation  is  like  the  use  of  fat  in  the 
individual.  (Quantulumcunquc  concerning  Money,  1682.)  Compare  Rosdicr, 
z.  Geschichte  der  eng.  Volkswirthschaftslehre,  80  f.  Davanzati  and  Hobbes 
had  compared  it  to  the  blood,  as  has  recently  Schmitthennery  Staatswissen- 
schaften,  1839,  I,  459.  North  calls  money  a  commodity  of  which  there  may 
be  an  excess  as  well  as  a  want.  (Discourse  on  Trade,  preface  and  postscript.) 
Compare  Locke,  Considerations  on  the  Lowering  of  Interest,  1691,  Works 
II,  13  ff.,  19.  Galiaiit,  1750,  Delia  Moneta,  IV,  holds  a  very  happy  middle 
place  between  the  alchymists  and  the  philosophic  contemners  of  gold.  See, 
further,  ^uesnaj,  id.  Daire,  64,  75  if.  Ttirgot,  Sur  la  Formation  des  Richesses, 
§  30  fF.,  had  many  clear  views  on  this  subject.  Verri,  Meditazioni,  1771,  II, 
I,  calls  money  the  universally  current  commodity.  The  expressions,  meas- 
ure of  value,  pledge,  representative  of  all  commodities  might  be  true  also 
of  all  other  wares.  It  cannot,  however,  be  denied  that  most  modern  political 
economists  have  not  borne  sufficiently  in  mind  the  peculiarities  which  dis- 
tinguish money  from  all  other  commodities,  as  is  apparent  from  the  doctrine 
of  the  balance  of  trade  prevalent  in  Hume's  and  Adam  Smith's  time.  To 
this  extent,  therefore,  the  semi-mercantilistic  reaction  instituted  by  Gatitl/i, 
Thdorie  de  I'Economie  politique,  2822,  II,  380  fF.,  426;  St.  C/iamaus,  N.  Essai 


3^6  CIRCULATION  OF  GOODS.  [B.  II,  Ch.  III. 

(puissance  liheratoire)^  where  no  other  is  expressly  agreed 
upon,  the  "universal  commodity"  in  question  then  becomes 
money  in  the  fullest  sense  of  the  idea  conveyed  by  the  word.® 

sur  la  Richesse  des  Nations,  1824,011.3;  and  Colton,  Public  Economy  for 
the  United  States,  1849,  203  ff.,  who  bring  into  relief  the  difference  between 
"money  as  the  subject"  and  "money  as  the  instrument  of  trade,"  was  not 
wholly  unfounded.  Ad.  MUller  exaggerates  a  correct  thought,  and  causes 
it  to  degenerate  into  a  species  of  mystic  pleasantry,  when  he  calls  every  in- 
dividual in  the  state  and  every  commodity  that  possesses  value,  in  exchange 
or  a  social  character,  money. 

The  highest  object  of  the  state  is  to  develop  this  money-character  more 
and  more.  (Elemente  der  Staatskunst,  II,  194,  199.)  The  statesman,  he 
says,  should  be  money.  (Ill,  206.)  A  very  valuable  monograph  on  this 
subject  is  M.  Chevalier's  De  la  Monnaie,  1850,  constituting  the  third  volume 
of  his  Cours  d'  Economic  polititique.  Knies^  Geld  und  Credit,  1, 1873,  is  here 
most  thorough  and  acute,  especially  in  keeping  separate,  by  well  defined  lines 
of  demarcation,  the  five  different  functions  of  money :  measure  of  value  (bv 
proper  division  into  parts:  price-measure),  instrument  of  exchange,  means  of 
transportation  of  values,  and  means  of  storing  up  and  preserving  values. 

3  Knies  shows  how  the  making  of  money  legal  tender  by  the  state,  al- 
though of  only  secondary  importance,  is  by  no  means  an  irrelevant  matter, 
since  persons  must  then  have  it,  even  if  they  do  not  want  it  for  purposes  of 
use  or  exchange,  to  discharge  their  liabilities  thereby  etc.,  etc.  (Tiibinger, 
Zetschrift,    1858,  272.) 

In  all  these  cases,  barter-economy  (Naturalwirthschaft)  meets  with  greater 
and  greater  difficulties  as  civilization  advances.  How,  for  instance,  could  50 
days  annually  of  socage-service  or  labor  be  redeemed  by  the  achievement  at 
one  time  of  1,000  days  of  socage-service  or  labor.?  The  rich  man  requires 
money  principally  as  a  means  of  payment,  the  poor  man  as  a  medium  of  ex- 
change. The  requirement  or  need  of  a  people  of  media  of  payment  is  much 
more  susceptible  of  extension  or  contraction,  than  thai  of  media  of  exchange, 
made  especially  so  by  the  intervention  of  claim-rights  instead  of  mone}'. 
(KnieSy  loc.  cit.,  200  ff.)  Ravit,  Beitr.  z.  Lehre,  vom  Gelde,  emphasizes  this 
feature  of  money  altogether  too  much  after  the  manner  of  a  jurist.  But  he 
is  entirely  right  in  adopting  the  exclusion  of  the  rei  vindicatio  against  the 
honest  possessor  as  necessary  to  the  completion  of  the  idea  of  money. 


Sec.  CXVII.]  INTRODUCTION  OF  MONEY.  347 

SECTION  CXVII. 

EFFECT  OF  THE  INTRODUCTION  OF  MONEY. 

By  the  introduction  of  money,  most  exchanges  are  divided 
into  two  halves:  purchase  and  sale.^  We  may  also  say  with 
Schlozer,  that  by  its  means,  exchange,  for  the  first  time,  be- 
comes a  sale,  and  obscure  value  in  exchange,  clear  and  defi- 
nite price.  (Permatio  vidua  emtioni).  Were  there  no  money, 
the  party  to  an  exchange,  occupying  the  most  advantageous 
economic  position,  would  possess  a  much  greater  superiority 
over  the  other  than  he  does  now.  Many  a  bread-buyer,  espe- 
cially, would  be  half  starved  before  he  could  agree  with  the 
seller  on  the  quantity  of  bread  to  be  received  in  exchange  for 
the  commodity  he  had  to  dispose  of.  The  producer  of  the 
means  of  subsistence  would  here  possess  an  extreme  advant- 
age, since  the  urgent  necessity  of  the  exchange  for  the  one 
party,  and  the  power  of  the  other  to  postpone  it,  would  make 
the  determination  of  the  price  an  entirely  arbitrary  matter.'* 
Hence,  the  development  of  money  as  the  instrument  of  trade, 
keeps  pace  with  the  development  of  individual  liberty.  Pay- 
ment of  wages  in  money  makes  the  workman  more  responsible 
for  his  husbandry  etc.,  but  at  the  same  time,  freer,  than  payment 
in  produce.  Now,  also,  a  higher  division  of  labor  becomes  pos- 
sible; for  the  easier  it  is  to  obtain  everything  else  for  money, 
the  easier  it  is  for  each  person  to  devote  himself  exclusively  to 
one  branch  of  business.^     Without  money,  too,  only  ready 

'^  Sismondi,  N.  P.,  I,  131,  very  rightly  remarks  that  this  has  made  practice 
as  much  easier  as  it  has  theory  more  difficult. 

'Zaw,  Trade  and  Money,  19.  Hence,  before  the  invention  of  money, 
scarcely  anything  but  the  things  most  indispensable  to  existence  were  pro- 
duced. Were  there  no  money,  there  would  be  very  few  scholars,  artists  etc.; 
for  the  classes  who  produce  most  of  the  things  indispensable  to  existence 
make  but  few  demands  for  them.     BuscJi,  Gcldumlauf,  I,  11  fl'.,  36,  II,  54. 

'  Turgot.^  Formation  et  Distribution,  §  4S  fF.  Commodities  which  perish 
rapidly  could  be  produced  by  persons  devoting  themselves  to  their  production 


348  CIRCULATION  OF  GOODS.  [B.  II,  Ch.  III. 

commodities  could  be  exchanged  one  against  another.  Only 
when  money  has  become  the  instrument  of  trade,  is  it  possible 
to  separate  the  net  from  the  gross  returns,  and,  therefore,  to 
manage  income  properly.  (Sdmffle).  Now,  also,  it  becomes 
for  the  first  time  really  remunerative  to  produce  more  than 
one  needs  for  his  own  use,  and  to  save.  Without  money,  the 
owner  of  any  one  kind  of  capital,  who  could  not  employ  it 
himself,  would  be  obliged,  if  he  desired  to  loan  it,  to  find  not 
only  a  person  who  was  in  need  of  capital,  but  one  who  needed 
the  very  kind  of  capital  he  had.  For  instance,  the  person  who 
had  one  horse  too  many,  would  be  obliged  to  look  for  another 
who  was  in  need  of  one  etc.  And  how  difficult  a  task  it  would  be 
to  determine  the  amount  of  interest,  if  it  had  to  be  paid  in  pro- 
duce or  kind,  and  even  to  make  a  return  in  produce  or  kind  of 
capital  which  had  been  presumably  used.  (Storch).  Moveable 
property  or  resources  can  attain  importance  only  after  the  in- 
troduction of  good  money,  since,  previous  to  such  introduction, 
it  was  by  reason  of  its  great  variety,^  and  of  its  perishable  na- 
ture, immensely  inferior  to  landed  property.  Hence  it  is,  that 
money,  in  a  nation's  economy,  is  what  the  blood  is  in  the  life 
of  the  animal.  It  is,  so  to  speak,  the  common  reservoir  in 
which  all  food  is  first  dissolved,  and  by  which,  at  a  later  stage, 
the  elements  of  nutrition  and  preservation  are  distributed  to 
the  several  organs.^     There  is,  indeed,  no  machine  which  has 

as  a  business  only  after  the  invention  of  small  coin.     (Lueder,  N.  CEk., 
1820,  283.) 
^  Compare  Kntcs,  Geld  imd  Credit,  I,  219. 

^Compare  Schmitthenner,  loc.  cit.,  I,  457.  One  of  the  principal  advantages 
of  money  consists  in  this,  that  every  producer  can  discover  what  there  is  an 
over-supply  or  under-supply  of  in  the  nation,  by  means  of  the  relation  of 
the  price  in  money  of  his  products  to  the  cost  of  producing  them,  estimated 
in  money,     (v.  Thiinen^  Isolirte  Staat.,  II,  2,  235.) 

^  Hence  it  is  that  so  many  socialists  attack  money  TJi.  More  assures  us 
that  with  the  simple  abolition  of  money,  vice  and  misery  would,  for  the  most 
part,  disappear  of  themselves.  Hence  in  his  Utopia,  criminals  are  bound  in 
golden  chains  and  the  chamber-pots  are  made  of  gold  and  silver  in  order  to 
make  these  metals  contemptible.  (Ed.  1555,  if.,   197  if.)  Similar  views  among 


Sec.  CXVII.]  INTRODUCTION  OF  MONEY.  349 

saved  as  much  labor  as  money.  (Lauderdale).  It  is  true  that 
the  shadows  which  wealth  is  wont  to  cast,  extravagance,  av- 
arice and  inequality  of  every  kind,  may  readily  grow  longer 
and  darker  in  consequence  of  the  introduction  of  money.*^  But 
may  not  the  knife  which,  in  the  hands  of  the  surgeon,  does  so 
much  for  life,  become  an  instrument  of  danger  in  the  hands  of 
a  child  ?  The  invention  of  money  has  been  rightly  compared 
to  the  invention  of  writing  with  letters.'  We  may,  however, 
call  the  introduction  of  money  as  the  universal  medium  of  ex- 
change (money-economy),^ in  which  goods  intended  for  use  are 
exchanged  against  money  ^  —  instead  of  barter  (barter  econ- 
omy), which  is  a  system  of  public  economy  (Sch'dffie)^  in  an, 
as  yet,  very  little  developed  form,  man  being  there  less  socia- 


the  over-cultured  Romans.  (Compare  §  §  79,  204.)  Auri  sacra  fames.  Vir- 
gil^ ^neid,  III,  56.  Pliny,  too,  -would  recall  the  days  of  trade  by  barter.  (H. 
N.,  XXXIII,  3.)  Even  in  Botsguillcbcri,  Factum  de  la  France,  ch.  4,  we  find, 
together  with  many  con-ect  views  on  the  nature  of  money,  passionate  decla- 
mation against  it  because  of  its  darker  side.  Argent  criminel.  (Detail  de  la 
France,  7.  Dissertation  sur  la  Nature  des  Richesses  etc.)  More  recently  this 
darker  side  has  been  dwelt  upon  by  F.  Moser,  Patriot.  Phant.,  I,  2S;  Ortcs, 
Economia  nazionale,  II,  17,  and  the  would-be  restorer  of  the  middle  ages, 
Ad.  MiiUer.  While  the  latter  writer  lauds  the  feudal  system  as  a  "  sublime 
fusion  of  person  and  thing  "  (Elemente  I,  221),  the  present  system  of  wages, 
because  it  is  a  system  of  compensation,  he  blames,  and  prefers  the  feudal  for 
the  opposite  reason  ( .').  "  The  only  merit  which  the  state  recognizes  in  our 
day  is  one  of  serviee."  (Ill,  259.)  Kosegarten^  Geschichtliche  systematische, 
Uebersicht  der  N.  Oek.,  1856,  146  ff.,  is  no  friend  to  the  economic  system  to 
which  money  gives  a  distinctive  character.  Per  contra.,  compare  Bastiaty 
Maudit  Argent,  1849. 

"^Mirabeau,  Philosophie  rurale,  1763,  ch.  2,  adds  as  the  third  great  inven- 
tion the  tableau  4conomiqiie  of  the  Physiocrates.  For  a  comparison  of 
money  and  language,  see  Hamann,  Werke,  II,  135  ff.,  509.  Ile/iti,  Kulturpflan- 
zen  und  Hausthiere,  finds  it  characteristic  of  the  race,  that  wine,  writing  with 
letters,  and  money,  all  owe  their  origin  to  the  monotheistic  stem  of  the  Sem- 
itic people. 

8  Where  every  man  becomes  a  merchant,  and  the  society  itself  a  commer- 
cial society.     Ad.  Stnitk,  Wealth  of  Nations,  I,  ch.  4. 

"Just  as  descriptive  is  the  German  word  billig  (equitable)  for  cheap.  Here 
it  is  plain  that  language  takes  sides  with  the  possessor  of  money ! 


350  CIRCULATION  OF  GOODS.  [B.  II,  Ch.  III. 

ble  with  his  fellow  men  —  one  of  the  greatest  and  most  be- 
neficent advances  ever  made  by  the  race.^° 

'"The  contrastbetween  barter-economy  and  money-economy  is  of  great  and 
fundamental  importance.  It  repeats  itself  with  so  much  regularity  in  the  his- 
tory of  every  highly  developed  nation,  that  political  economists  gifted  with 
perception  for  the  historical,  could  not  possibly  overlook  it.  Thus,  Arisiotle, 
for  instance,  establishes  with  the  utmost  care  and  accuracy  the  difference 
between  OCXOUO^ixh  and  yoT^tjiatKTTCXTJ,  that  is,  between  natural  economy  and 
artificial  economy,  corresponding  to  the  difference  between  value  in  use  and 
value  in  exchange.  (Polit.,  I,  3,  Schn.)  Similarly  Z>.  Hume,  who  allows  a 
period  of  luxury,  culture,  industry,  of  trade  and  manufactures,  of  freedom 
and  circulation  of  money,  to  be  preceded  by  one  in  which  the  feeling  of  wants 
is  not  awakened,  in  which  coarseness  and  idleness  prevail,  one  in  which 
agriculture  is  alone  pursued,  and  monetary  economy  and  freedom  decline, 
and  trade  by  barter  obtains.  (Discourses,  passim,  especially  On  Interest 
and  on  Money.)  A  similar  contrast  we  find  frequently,  and  as  one  of  his 
fundamental  thoughts,  in  J^.  Steuart. 

As  to  how  the  transition  from  barter-economy  to  monetary-economy  is 
generally  effected,  see  J.  G.  Hoffmann,  Lehre  vom  Gelde,  1S3S,  176  ff.  In 
the  Tvrol,  as  late  as  1820,  the  greater  portion  of  purely  mechanical  work, 
such  as  that  of  the  smith,  the  carpenter,  and  the  washerwoman,  were  purely 
feudal  duties.  On  the  other  hand,  payment  in  money  was  the  rule,  in  the 
beginning  of  the  fourteenth  century.  (J.  Beidermanv,  Technische  Bildung 
in  Oesterreich,  3.)  Yet,  for  a  long  time  after,  the  functions  of  a  measure  of 
value  were  performed  by  pieces  of.  land,  and  those  of  an  instrument  of  ex- 
change by  cattle  and  natural  products.  (Arnold,  Gesch.  des  Eigenth.,  207.) 
In  France,  money-economy,  i.  e.,  trade  by  money,  had  grown  to  importance 
earlier.  ("iViVic//.,  Ministerialitat  und  Biirgerthiuu,  im  11.  und  12.  Jahr.,  143.) 
Even  in  the  time  of  Mary  Stuart,  the  Scotch  estimated  the  rent  of  land  in 
"cauldrons  of  victuals."  (Moryson,  Itinerary,  1617,  III,  155.)  In  ancient 
Italy,  during  the  first  three  centuries  of  Rome,  there  was,  with  the  exception 
of  the  Greek  colonies,  only  trade  by  barter.  Mommsen,  Romische  Gesch.,  I, 
293,  shows  that  the  oldest  ases  were  not  money  in  the  higher  sense  of  the 
word,  but  belonged  rather  to  the  stage  of  barter-economy.  On  the  other 
hand,  we  find  in  the  time  of  the  classic  jurists,  much  as  slavery  had  limited 
the  sphere  of  action  of  money,  the  principle :  pecunicB  nomine  non  solum  nu- 
merata  fecunia,  scd  omnes  res,  tarn  soli  quam  mobiles,  et  tarn  corpora  qua?n  j ura 
coiitincntur.  (L.  222,  Digest  L.  16;  compare  4,5,  178.)  Similarly  in  Cicero, 
Top.  6.  De  Invent.,  II,  21.  De  Legg,  II,  19,  2I;  III,  3.  Compare  Diofiys. 
Hal,  N.  R.  IV,  15. 


Sec.  CXVIII.J        DIFFERENT  KINDS  OF  MONEY.  $f,l 

SECTION  CXVIII. 

THE  DIFFERENT  KINDS  OF  MONEY. 

Very  different  kinds  of  commodities  have,  according  to  cir- 
cumstances, been  used  as  money;  but  uniformly  only  such  as 
jDOssess  a  universally  recognized  economic  value.^  On  the 
whole,  people  in  a  low  stage  of  civilization  are  wont  to  employ, 
mainly,  only  ordinary  commodities,  such  as  are  calculated  to 
satisfy  a  vulgar  and  urgent  want,  as  an  instrument  of  ex- 
change. As  they  advance  in  civilization,  they,  at  each  step, 
choose  a  more  and  more  costly  object,  for  this  purpose,^  and 
one  which  ministers  to  the  more  elevated  wants. 

'  Were  money  nothing  but  a  measure  of  values  in  exchange,  it  should 
on  that  account,  if  on  no  other,  have  value  in  exchange  itself,  as  a  measure 
of  length  must  necessarily  have  length  itself.  (We  measure  time  on  a 
clock  by  means  of  the  revolution  of  the  hands  on  the  dial.)  Again,  value 
in  exchange  supposes  value  in  use.  The  so-called  "money  of  account," 
such  as  the  East  Indian  lac  de  rouptes,  the  Portuguese  reis,  and  the  earlier 
English  found  sterling  are  no  imaginary  magnitudes,  which  would  disappear 
with  the  figures  of  our  system  of  counting  (see  Hufclattd,  N.  Grundlegung, 
II,  33,  in  reply  to  Struensec,  Abh.,  Ill,  501);  but  real  coin-values  which 
can  not  he  represented  by  only  single  pieces  of  coin,  units  of  value  for  the 
most  part  no  longer  recognized  by  the  state,  but  which  the  people  still  retain. 
See  M.  Parkas  (Travels,  27)  refutation  of  the  fable  circulated  by  Montesquieu, 
Esprit  des  Lois,  XXII,  8,  that  the  regular  standard  money  of  the  Mandingo 
negroes  was  a  mere  imaginary  standard.  Ilobbes,  Leviathan,  24,  exhibits  a 
very  good  knowledge  of  this  subject. 

2  Compare  P.  Neri,  Osservazioni,  1751,  VI,  i.  Lord  LiverJ>ool,  Treatise 
on  the  Coins  of  the  Realm,  1S05.  The  person  who  takes  money  as  such 
must  always  harbor  the  hope  of  being  able  to  dispose  of  it  again  as  money. 
Hence,  such  an  acceptance  always  supposes  the  existence  of  a  certain  amount 
of  commercial  confidence.  The  savage  Goahiros,  between  Rio  de  la  Hacha 
and  Maracaibo,  are  too  "  distrustful  "  to  take  anything  in  trade  but  commod- 
ities fit  for  the  most  immediate  use.  (Depons,  Voyage  dans  la  Terrefirme, 
I,  314-)  Similarly  in  the  twelfth  century,  the  heathen  Laplanders.  (Arndt, 
Liefl.  Chronik,  II,  3.)  Commodities  which  barbarians  can  consume  imme- 
diately are  objects  of  the  first  necessity,  whereas  more  civilized  people,  who 
are  in  a  condition  to  undergo  greater  expense,  look  more  to  the  technic  quali- 
ities  of  money,  such  as  divisibility,  capacity  for  transportation  and  durabil- 


352  CIRCULATION  OF  GOODS.  [B.  II,  Cii.  III. 

A.  Races  of  hunters,  at  least  in  non-tropical  countries, 
usually  use  skins  as  money;  that  is  the  almost  exclusive  pro- 
duct of  their  labor,  one  which  can  be  preserved  for  a  long 
period  of  time,  vv^hich  constitutes  their  principal  article  of 
clothing  and  their  principal  export  in  the  more  highly  devel- 
oped regions.^ 

B.  Nomadic  races  and  the  lower  agricultural  races,*  pass, 
by  a  natural  gradation,  to  the  use  of  cattle  as  money;  which 
supposes  rich  pasturages  at  the  disposal  of  all.  If  it  were 
otherwise,  there  would  be  a  great  many  to  whom  payments 

ity.  V.  Schecl  shows  in  a  very  happy  manner  how,  as  commerce  increases, 
money  comes  to  be,  as  it  were,  subjected  to  a  process  resembling  that  of  dis- 
tillation: first  mere  increase  of  stores  for  use,  next  preponderating  values  in 
exchange,  lastl}'  mere  orders  for  the  same  possessing  no  independent  value. 
(Hildebrnnd^s  Jahrbb.,  1866, 1,  16. 

2  The  last  circumstance  continues  to  be  one  of  great  importance  for  a  long 
period  of  time  in  the  frigid  zones.  Thus,  the  beaver-skin  continues  still  to 
be  the  unit  of  measure  of  trade  in  much  of  the  territory  of  the  Hudson  Bay 
Company.  Three  martens  are  estimated  to  be  equal  in  value  to  one  beaver, 
one  white  fox  to  two  beavers,  one  black  fox  or  a  bear  to  four  beavers,  a  rifle 
to  fifteen  beavers.  (Ausland,  1S46,  No.  21.)  The  Esthonian  word,  raha, 
money,  means  in  the  related  language  of  the  Laplanders,  fur.  (Krug,  2ur 
Miinzkunde  Russlands,  1805.)  Concerning  skin-money  in  the  middle  age  of 
Russia,  see  JVcsfoi;  Sclilozcr^s  translation.  III,  90.  The  old  word  kttng, 
money,  means  marten.  By  degrees  it  came  to  pass  that  instead  of  wliole 
skins,  only  two  "  snouts  "were  given  or  other  pieces  of  leather  about  a  square 
inch  in  size,  which  were  probably  stamped  by  the  government  and  redeemed 
in  whole  skins  at  the  government  magazines.  Hence,  there  is  here  supposed 
a  species  of  assignats,  and  of  disturbances  of  credit.  The  Mongolian  con- 
querors would  not  recognize  them,  and  they  therefore  became  suddenly  val- 
ueless. In  Novgorod  and  Pskow,  the  system  continued  some  time  longer, 
for  the  reason  that  these  places  had  little  trade  with  the  Mongols.  In  the 
rest  of  the  kingdom  it  now  became  necessary  to  iatroduce  silver  money,  and 
in  the  north  to  return  to  real  squirrel  and  beaver  skins.  Karamsin^  Russ. 
Gesch.,  I,  203,  3S5;  I,  96,  191  f.  Voyage  de  Rubruquis,  in  Bergeron^  Voy- 
ages I,  91.  Hcrbcrstem,  Rer.  moscov.  Commentt.,  58  if.  Even  in  1610,  a 
Russian  military  chest  was  captured  by  the  enemy,  and  in  it  were  found  5450 
silver  rubles,  and  7000  fur  rubles.     (Karamsin^  XI,  183.) 

•*  When  the  Danes  progressed  so  far  as  to  practice  agriculture,  they  used 
grain  instead  of  cattle,  in  quantities  corresponding  to  the  value  of  one  cow  or 
one  sheep,  for  money,  to  the  end  that  their  idea  of  a  unit  of  measure  might 
not  become  obscured.     (Ravit,  Beitrage,  3.) 


Sec.  CXVIII.]         DIFFERENT  KINDS  OF  MONEY.  353 

of  this  kind  had  been  made,  who  would  not  know  what  to  do 
with  the  cattle  given  them,  on  account  of  the  charges  for  their 
maintenance.^ 

'Homeric  determination  of  prices  in  oxen.  Iliad,  II,  449;  VI,  236;  XXI, 
79;  XXIII,  703  ff;  Odyss.,  I,  431.  Compare,  however,  II,  VII,  473  ff.  In 
Draco's  time,  money-fines  were  imposed  in  cattle  (Pollux,  IX,  60  ft"),  and  in 
Athens,  before  Solon's  time,  even  the  metal  coins  were,  for  the  most  part, 
stamped  with  the  figure  of  an  ox.  Plutarch,  Theseus,  25.  Bockh.,  Metr. 
Uuntcrsuch.,  121  ft".  Among  the  most  ancient  Romans  (Cicero,  de  Rep.,  II, 
35)  the  imposition  of  fines  in  property,  the  coins  first  stamped  by  Servius, 
bourn  pviumque  effigie  (Plin.,  H.  N.,  XVIII,  3,  Cassiodor.,  Var.,  VII,  32),  and 
the  words  j>ecunia,  peculium,  feculatus,  derived  from  fecus,  point  to  some- 
thing analogous.  (Varro,  De  L.  L.,  V,  19;  De  Re  rust.,  II,  i;  Cicero,  De 
Rep.,  11,9;  Ovid,  Fast,  V,  2S1;  Plutarch,  Publicola,  11.)  Old  German  fines 
in  cattle,  in  Tacitus,  Germ.,  12,  21;  Lex  Ripuar,  36,  11;  Lex  Saxonum,  19. 
Ulfilas  translates  aoyuoiOV  doovo.l  (Marl;  14,  11),  faihu  gibaii.  Very  old 
German  documents,  of  the  seventh  and  eighth  centuries,  name  horses  as 
purchase-price.  (Grimm,  Deutsche  Rechtsalterth.,  586  f.)  Otho  the  Great 
imposed  cattle-fines.  (Widuk  Corb.,  II,  6.)  Similarly,  in  King  Stephen's 
laws  of  Hungary  (Wachsmuth,  Europaische  Sitturgesch.,  II),  in  the  old 
Irish  Brehon  laws  (Leland,  History  of  Ireland,  36  ft".),  as  well  as  in  the 
Scotch  collection  of  laws,  Regiam  Majestatem,oi  1330.  (Honard,  II,  263  f, 
537.)  Fz"f«/^c?<M/rt  of  the  Anglo-Saxons  in  the  laws  of  William  I.  In  an- 
cient Sweden,  all  property  was  estimated  in  ya— cattle  (Geijcr,  Schw.  Gesch., 
I,  100),  just  as  now,  in  Icelandic,  y"e=property.  In  Berne,  the  German  vieh, 
cattle,  is  used  to  express  commodities.  Among  really  nomadic  races  this  is, 
of  course,  still  more  the  case.  Thus  the  Kirghises  use  horses  and  sheep  as 
money,  and  wolf-skins  and  lamb-skins  for  small  change.  (Pallas,  Reise 
durch  Russland,  1771,  I,  390.)  Among  some  of  the  Tartar  tribes,  everything 
is  stipulated  for  in  cows.  (v.  Haxthausen,  Studien,  II,  371.)  Among  the  Per- 
sian nomads,  sheep  are  used  as  money ;  or  when  they  are  held  in  subjection 
in  the  cities,  corn,  straw  and  wool.  (Ritter,  Erdkunde,  VIII,  386.)  Oxen  in 
use  as  money  among  the  Tscherkessens.  (Klemm,  Kulturgeschichte,  IX,  16.) 
W.  B.  Hermann  doubts,  however,  whether  cattle  were  ever  used  as  a  medi- 
um of  exchange.  He  thinks  rather  they  were  employed  only  as  a  measure 
of  price.     (Miinchener  Gel.  Anz.,  580.) 

Vol.  I.— 23 


354  CIRCULATION  OF  GOODS.  [B.  II,  Ch.  III. 

SECTION  CXIX. 

THE  METALS  AS  MONEY. 

C.  That  metals  were  used  for  the  purpose  of  money  much 
later  than  the  commodities  above  mentioned,  and  the  precious 
metals  in  turn  later  than  the  non-precious  metals,  cannot  by 
any  means  be  shown  to  be  universally  true.  Rather  is  gold 
in  some  countries  to  be  obtained  by  the  exercise  of  so  little 
skill,  and  both  gold  and  silver  satisfy  a  want  ^  so  live  and  gen- 
eral, and  one  so  early  felt,  that  they  are  to  be  met  with  as  an 
instrument  of  exchange  in  very  early  times.^  In  the  case  of 
isolated  races,  much  depends  on  the  nature  of  the  metals  with 
which  the  geologic  constitution  of  the  country  has  furnished 
them.^  In  general,  however,  the  above  law  is  found  to  pre- 
vail here.     The  higher  the  development  of  a  people  becomes, 

'  That  of  vanity  which  presents  itself  among  some  people  sooner  than  that 
of  clothing. 

2  In  Genesis,  1,  24j  gold  appears  only  as  a  valuable  ornament.  Abraham 
paid  for  his  purchases  in  silver. 

^  For  this  reason,  zinc-money  is  just  as  natural  with  the  Malays  and  Chi- 
nese as  iron-money  with  the  Senegambians.  (Mungo  Park,  Travels,  27.) 
And  so  Plutarch,  Lysand.,  17,  may  be  right  when  he  calls  iron  the  earliest 
universal  means  of  payment,  In  Sparta,  too,  where  industrious  efforts  were 
made  to  maintain  the  lower  stage  of  culture,  this  medium  of  payment  was 
longest  maintained.  Compare,  however,  St.  John,  The  Hellenes,  III,  260  ff. 
The  first  copper  coins  were  stamped  a  short  time  before  Philip,  father  of  Alex- 
ander the  Great.  (Eck-kd,  Doctr.  Numm.,  I,  XXX  ff.)  On  the  other  hand, 
Italy,  partly  because  it  had  mines  of  its  own,  and  partly  because  of  its  inter- 
course with  Carthage  (Cyprus),  had  become,  at  a  very  distant  period, 
so  rich  in  copper  that  the  circulation  of  copper,  or  to  speak  more  accurately-, 
of  bronze,  was  naturally  introduced.  Compare  Niebtihr,  Rom.  Gesch.,  I, 
475  ff.  (Aes  alienum,  obceratus,  cerarium,  cestimare.)  Copper  Avas  all  the  more 
adapted  to  this  end  the  more  frequently  it  was  found  unmixed.  It  was  gener- 
ally used  in  preference  to  iron  because  of  the  greater  facility  of  working  it. 
(Hcsiod.,  Opp.,  150  f.;  Lucret.,  V,  1285  f)  In  modern  nations  copper  money 
seems  to  have  been  employed  only  after  silver  money.  Thus,  it  was  not 
stamped  in  England  before  tlie  time  of 'James  I.  (Adam  Smith,  I,  ch.  5),  nor 
in  Sweden  before  1625.  (Gcijer,  Schwed.,  Gesch.,  Ill,  56.)  Money  was 
•sh-uck  from  the  metal  of  molten  bells  during  the  French  Revolution ! 


Sec.  CXIX.]  THE  METALS  AS  MONEY.  355 

the  more  frequent  is  the  occurrence  of  large  payments; 
.and  to  eflect  these,  the  more  costly  a  metal  is,  the  better,  of 
course,  it  is  adapted  to  effect  such  payments.  Besides,  only 
rich  nations  are  able  to  possess  the  cosll}-.  metals  in  a  quantity 
absolutely  great.'*  Among  the  Jews,  gold  as  money,  dates  only 
from  the  time  of  David.^  King  Pheidon,  of  Argos,  it  is  said, 
introduced  silver  money  into  Greece,  about  the  middle  of  the 
eighth  century  before  Christ.  Gold  came  into  use  at  a  much 
later  period.^  The  Romans  struck  silver  money,  for  the  first 
time,  in  209  before  Christ,  and,  in  207,  the  first  gold  coins." 
Among  modern  nations,  Venice  (1285)  ^^^  Florence  seem  to 
have  been  the  first  to  have  coined  gold  in  any  quantity.^ 
Henry  III.  of  England  (ob.  1272),  was  the  first  to  coin  gold, 
but  witli  so  little  success,  that  for  a  long  time  after,  Edward 
III.  (ob.  1377)  was  regarded  as  the  first  English  monarch  who 
had  coined  gold.^  How  little  a  barbarous  people  are  in  a 
condition  to  make  use  of  very  costly  material  as  money,  is 


*  In  Russia,  between  1763  and  17SS,  there  were  76  million  rubles  of  gold 
.nnd  silver  coins  struck,  against  54  million  of  copper  rubles.  (Hermann.) 
On  the  other  hand,  in  France,  between  1727  and  1796,  there  were  struck  only 
40  million  francs  of  copper,  10  million  of  billon  or  base  coin,  and  3967  million 
of  gold  and  silver. 

^  Alichaelts,  De  Pretiis  Rerum  apud  veteres  Hebrseos,  183. 

^  Strabo,  VIII,  358.  Hiero,  tyrant  of  Syracuse,  found  it  exceedingly  diffi- 
cult to  obtain  gold.  When  the  Spartans  wished  to  make  an  offering  of  gold 
at  Delphi  they  were  obliged  to  have  recourse  to  Croesus.  (Hcyodoi.,  I,  69; 
Thcopomp.,  in  Af/ien,  VI,  231  ff.)  Aristofh.,  Ranae,  720,  calls  gold  "new"  in 
contradistinction  to  the  "  old  money,"  that  is,  silver. 

Tlin.,  H.  N.,  XXXIII,  13.  Compare,  however,  Dtircau  de  la  Malic, 
Economic  polit.  des  Romans,  I,  69,  after  Varro,  apud  Charisium,  I,  81. 
(Putsch.)  It  is  certain,  how-ever,  that  when  Italy  was  conquered,  the  Ro- 
mans had  introduced  a  circulating  medium  of  silver,  and  that  it  was  the 
prevailing  medium;  but  in  the  time  of  Cajsar  and  Augustus,  a  gold  circula- 
tion was  the  prevalent  one.  Yet  the  state  treasure  was  deposited  in  gold 
during  the  period  of  silver  circulation,  because  gold  was,  without  question, 
better  adapted  to  storing  up  and  transportation. 

^Muraiort,  Antiquitt.,  IV,  Diss.,  28. 

*  Henry  was  obliged  to  issue  an  order  to  the  mayor  and  sheriffs  of  London, 
to  get  his  gold  into  circulation;  but  he  soon  saw  himself  compelled  to  desist 


356  CIRCULATION  OF  GOODS.  [B.  II,  Cii.  III. 

proved  by  the  account  which  Tacitus  gives  of  the  ancient 
Germans,  who  preferred  silver  to  gold  in  trade.^*^  England 
presents  us  with  an  instance  of  the  other  extreme.  Since 
1816,  silver,  in  that  country,  has  been  used  only  as  a  species 
of  change,  and  the  circulation  of  gold  governs  in  almost  all 
commercial  transactions.^^ 

D. .  The  local  usage  of  some  countries  has  raised  many 
other  commodities  to  the  dignity  of  instruments  of  exchange, 
especially  where  the  population  are  poor  and  the  metals  which 
might  be  used  as  money  have  not  existed  in  sufficient  quanti- 
ties or  in  the  requisite  proportion.  But  people  have  always 
limited  themselves  in  the  material  of  their  money  to  such 
commodities  as  are  universally  acceptable,  as  uniform  as  may 
be,  and  current  as  articles  of  export  or  import.^^ 

from  executing  his  design.  Edward  III.  was  able  only  after  a  voluntary  cir- 
culation of  them  had  continued  for  a  long  time,  to  prohibit  any  one's  refusing 
the  rose-nobles.     {L.  Liverpool,  loc.  cit.) 

'*  German.,  5.  Still  more  striking  is  the  example  cited  by  Herbelot,  Biblio- 
theque  Orientale  (1697),  485.  Rubriiquis,  Voyage,  ch.  13.  In  the  time  of 
Nadir-shah,  the  Kurds  gave,  without  the  slightest  hesitation,  a  pound  of  gold 
for  a  pound  of  silver  or  copper.     (Ritter,  Erdkunde,  VIII,  395.) 

'*  Recommended  even  by  Adam  Smith,  ch.  5,  and  for  Germany  by  J.  G. 
Hoffmann,  Drei  Avifsatze  iiber  das  Miinzwesen,  1832.  In  Egypt,  also,  for  a 
long  time  the  wealthiest  country  of  the  middle  ages,  the  circulation  of  gold 
prevailed  until  the  twelfth  century.  (Macrisi,  Historia  Monetae  Arab.,  cap. 
3  ed.,  Tychsc7i.)  Harun  Alraschid's  income  was  estimated  at  about  7,500  cwt. 
of  gold.  (Hitter,  Erdkunde,  X,  235.)  Something  similar  related  of  the  Car- 
natic,  "the  land  of  ancient  emporiums."  Ritter,  Erdkunde,  V,  564,  after 
Ferislita. 

'*  The  use  of  the  cauris  (Cyfrcea  moneta)  in  India  this  side  and  beyond  the 
Ganges,  in  upper  Asia,  and  in  southern  Africa  depends  on  their  employment 
for  purposes  of  ornameut,  on  their  greater  uniformity,  and  on  the  rarity  of 
copper  which  would  otherwise  be  better  suited  to  purposes  of  change.  In 
Calcutta,  1280  cauris  are  equivalent  to  about  half  a  shilling.  (McCulloch.) 
Compare  K.  Ritter,  Africa,  149,  324,422,  1038;  Asien,  1,964;  II,  120;  III, 
233,  739;  IV,  53,420;  Solin,  III,  62;  Botz,  in  the  Tiibinger  Ztschr.  Simi- 
larly among  the  fishing  population  of  Northwestern  America.  (Stein-  Waf- 
pdus,  Handbuch  I,  352.)  Salt  as  money  on  the  Chinese-Birman  boundary 
(Marco  Polo,  38),  but  especially  in  the  interior  of  Africa,  where  nature  docs 
not  at  all  produce  it,  but  into  which  it  is  brought  by  caravans  from  the  des- 


Sec.  CXX.]  THE  PRECIOUS  IsIETALS.  357 

SECTION  CXX. 

MONEY  — THE  PRECIOUS  METALS. 
That  the  precious  metals  are  uniformly  preferred  in  highly 


crts,  where  salt  is  found  in  great  quantities.  M.  Polo,  Travels,  305,  found  the 
current  price  of  a  salt-tablet,  two  and  a  half  feet  long,  one  foot,  two  inches 
broad,  and  two  inches  thick,  to  be  equal  to  the  value  of  two  pounds  sterling 
among  the  Mandingos.  In  Abyssinia,  the  salt-bars  are  generally  six  inches 
long,  three  inches  broad,  one  and  a  half  inches  thick,  and  they  are  bound 
with  an  iron  ring  to  protect  them  against  fracture.  Sixty  of  them  are  worth 
one  thaler.  (Ausland,  1846,  No.  35.)  Slaves  used  as  money:  Barth,  Reise, 
III,  338,  344.  Tea-blocks  in  upper  Asia  and  Siberia;  and  they  are  given  by 
the  Chinese  to  the  Mongols  as  pay  for  troops.  (Rittcr,  Asien,  III,  252,)  In 
Keachta,  a  tea-block  is  equal  in  price  to  one  paper  ruble.  (Ausland,  1846, 
No.  20.  Timkawski,  Reise  nach  China,  143.)  Date-money  in  the  Sivah  oasis. 
( Homcmann,  Reise,  21.)  Also  in  the  Persian  date-country,  where,  formerly, 
the  lowest  silver  piece  of  money  was  coined  m  the  form  of  a  date  (Ritter, 
Asien,  VIII,  752,  S19.) 

The  ancient  Mexicans  used  as  money  cocoa-nuts,  in  bags  of  24,000  pieces, 
cotton-stuffs,  small  pieces  of  copper,  and  gold  dust  in  quills.  (Humboldt, 
N.  Espagne,  IV,  11.)  Cocoa-beans  are  still  used  as  small  change  there. 
(Ibidem,  IV,  10.)  On  the  Amazon,  wax-cakes  weighing  one  pound  ai-e  used. 
(Smyth,  Journey  from  Lima  to  Para,  1836.)  Among  the  ancient  inhabitants 
of  Riigen,  linen  (Helmold,  I,  39);  and  still  among  the  Icelanders,  the  so- 
called  Vadhmdl.  During  the  middle  ages,  120  ells  of  Vad/i>ndl  ^&i'&  equal 
in  value  to  one  milch  cow  or  six  inilch  sheep,  or  two  and  a  half  ounces  of 
silver.  (Leo  in  Raiaiicr^s  histor.  Taschenbuch,  1835,  515.)  That  the  ancient 
northern  mode  of  valuation,  by  the  Vadhmdl  and  in  cows  is  older  than  by 
the  markis  shown  by  Wilda,  Gesch.  des  deutschen  Strafrechts,  I,  331.  The 
cod-fish  money  used  by  the  Icelanders  was,  on  account  of  its  great  commer- 
cial importance  as  an  article  of  export,  an  advance  upon  the  use  of  the 
Vadhmdl.  Among  the  CafRrs,  besides  cauris,  mats,  javelins,  glass  corals,  but 
particularly  brass  rings,  are  used  as  money.  From  three  to  four  hundred  of 
these  rings  arc  strung  together,  and  two  such  strings  are  equal  in  value  to 
one  cow.  (Klemm,  Kulturgeschichte,  III,  308,  320  f.)  Ivory  used  as  money 
in  the  neighborhood  of  the  Portuguese  colonies  in  Africa.  (Martins,  Reise, 
II,  670.)  In  Logone,  Dc7iham  (1822)  if.,  had  met  with  pieces  of  iron  as  a 
medium  of  circulation;  but  on  the  other  hand,  Barth  (1849),  with  small 
strips  of  cotton  from  2  to  3  inches  in  breadth,  and  shirts  for  larger  sums. 
(A.  R.,  Ill,  274,  297,  53S.)  In  colonies,  money  of  this  nature  is  continued 
for  a  long  time.     Thus  cod-fish  used  in  Newfoundland,  sugar  in  the  English 


358  CIRCULATION  OF  GOODS.  [B.  II,  Cn.  III. 

cultivated  nations  ^  as  the  instrument  of  exchange,  depends  on 
the  greatness  and  uniformity  of  their  value  in  exchange,  but 
especially  on  their  durability  and  pliancy  as  to  form. 

This  value  in  exchange  is  great,  because  their  beauty,  which 
consists  in  their  luster  and  their  sonorous  ring,^  gives  them 
great  value  in  use ;  and  because,  at  the  same  time,  their  rarity 
in  nature  makes  the  supply  of  them  relatively  small,^  and  not 
susceptible  of  increase  at  pleasure.*     As  they  contain  so  large 

West  Indies  (Adam  Smithy  I,  ch.  4),  tobacco  in  Maryland  and  Virginia. 
(Douglas^  V,  2,  389;  Ebeling,  V,  435  ff.)  The  last  was  related  to  the  inspec- 
tion and  storage  of  the  tobacco  intended  for  exportation.  Payment  was 
made  in  orders  on  the  stored  and  inspected  tobacco,  even  as  late  as  the  end 
of  the  eighteenth  century.  In  1618,  the  forced  circulation  of  tobacco  was 
decreed  in  Virginia,  and  under  severe  penalties.  (Gouge,  Histoiy  of  Paper- 
Money  and  Banking  in  the  United  States,  ch.  i.) 

'  When  the  caravans  no  longer  touched  at  the  oasis  Agades,  gold  and  sil- 
ver money  fell  into  disuse,  and  grain,  stuffs  etc.  did  service  as  instruments  of 
circulation.     (Barih,  Reisen  und  Endeckungen,  I,  144.) 

^  Ad.  Miiller  says  very  pertinently,  but  in  a  very  inystical  vein,  that  the 
precious  metals  combine  in  a  very  high  degree  and  yet  in  a  very  simple  man- 
ner, the  principal  qualities  in  which  man's  greatness  finds  expression :  rarity, 
flexibility,  uniformity,  mobility,  durability  and  beauty.  (Elemente,  II,  266.) 
In  another  place,  he  says,  the  highest  ideal  good  is  God,  the  highest  material 
good,  gold!  (111,65.)  The  mysticism  of  gold  was  most  highly  developed 
am.ong  the  alchymists  of  the  sixteenth  and  seventeenth  centuries. 

'  Iron  beds  are  worked  only  when  they  contain  at  least  iS  per  cent,  of  metal. 
Generally  it  is  estimated  that  the  furnace  should  yield  30  per  cent.  In  the 
copper  inines  of  Mansfield,  Norway,  Agordo  and  Venice,  it  goes  as  low  as 
from  one  to  three  per  cent.  On  the  other  hand,  silver  inines  which  yield  0.17 
per  cent,  of  metal  are  considered  worth  working.  Lastly,  gold  is  so  rare  that 
generally  it  can  be  extracted  only  from  time  to  time  by  the  oi'dinary  mining 
processes.  As  a  rule,  men  are  content  to  gather  it  where  nature  has  charged 
itself  with  its  refining.  The  extreme  limit  of  the  working  of  gold  appears, 
according  to  Plattner  and  Haussmarm,  at  Goslar,  to  be  reached  when  in 
5,200,000  parts  of  mineral  earth  there  is  one  of  gold.  Spite  of  this,  however, 
by  reason  of  their  great  ductility,  the  precious  metals  have  been  able  to  pen- 
etrate even  into  the  meanest  huts  in  one  form  or  another.  It  has  been  esti- 
mated that  a  silver  leaf  may  be  attenuated  by  beating  to  a  thickness  of  only 
o.ooooi  of  an  inch,  and  a  gold  leaf  to  0.0000035  of  an  inch.  An  ounce  of  gold 
spread  on  a  silver  thread  may  attain  a  length  of  13,000  English  miles.  (Mc- 
Culloch.) 

*  How  easily,  for  instance,  could  leather-money,  such  as  was  used  by  the 


Sec.  CXX.] 


THE  PRECIOUS  METALS. 


359 


a  value  in  so  small  a  volume,  they  are  adapted  to  transporta- 
tion from  one  place  to  another,  with  but  little  difficulty  —  a 
matter  of  the  greatest  importance  in  an  instrument  of  ex- 
change.^ Hence,  it  is  much  easier  to  keep  the  demand  for 
them  and  the  supply  of  them  at  a  level  all  over  the  world, 
than  it  is  the  demand  and  supply  of  most  other  commodities. 
And  this  all  the  more  as  there  are  not  dilierent  kinds  of  gold 
and  silver,  but  only  different  qualities  of  their  fineness.^  It 
also  contributes  to  the  uniformity  of  their  value  in  exchange, 
that  they  minister  mainly  only  to  wants  of  luxury.  The  most 
indispensable  commodities  are  subject  to  the  greatest  varia- 

ancient  Galls  (Cassiodor.^  Varia,  II,  32,)  be  increased  to  any  desired  quan- 
tity, and  thus  its  price  brought  down. 

^  Engcl^  at  the  usual  tariff  for  land  and  railroad  freight  (10  and  5  ffomigs 
per  inile  and  hundredths  of  a  mile)  estimates  the  enhancement  of  the  price 
of  the  following  commodities,  for  one  mile  of  transportation  of  a  custom- 
hundred-weight  (ZoHcefitjier)  at  the  following  percentage  of  their  average 
value : 


Commodities. 

Value, 
fcr   civf. 

By  Land. 

Railroad. 

German 

lieichsthaler. 

Gold,         -     -     - 

47610 

0.000007 

0.0000035 

Silver,      -     -     - 

3000 

o.oom 

0.00055 

Cotton,     -     -     - 

45 

0.074 

0.037 

Tin,     -     -     -     - 

0.1389 

0.0694 

Lead,        -     -     - 

8 

0.416 

0.20S 

Iron,         -     -     - 

2-S 

1-333 

0.666 

Rye,         -     -     - 

2 

1.666 

0.833 

Potatoes,       -     - 

0.6 

5-S.SS 

2-777 

Coal,        -     -     - 

0.12 

27.777 

13.8S8 

Then-  great  specific  gravity,  also,  makes  the  precious  inetals  easy  of  trans- 
portation. Thus  Cazeau  calculates  that  a  given  value  of  gold  is  17,223  times 
as  easy  to  transport  as  the  same  value  in  wheat.  But  as,  where  the  weight 
is  the  same,  the  labor  of  transportation  is  inversely  as  the  volume,  this  num- 
ber must  be  multiplied  by  26,  and  we  therefore  have  447,773  times.  In  the 
case  of  silver,  the  relation  to  wheat  is  as  i  :  15,554.  Concerning  copper,  see 
Siorch,  Ilandbuch  i,  48S.     Chevalier,  Cours,  III,  17  ff. 

6  This,  at  bottom,  is  also  true,  of  the  various  kinds  of  copper;  only,  here, 
complete  refining  is  impracticable  on  account  of  the  relation  between  the  cost 
of  production  and  the  product-price. 


360  CIRCULATION  OF  GOODS.  [B.  II,  Ch.  III. 

tions  in  price  (see  §  103),  whereas,  in  the  case  of  the  precious 
metals,  the  diversity  of  uses  to  which  they  may  be  turned 
contributes  greatly  to  render  their  value,  as  instruments  of  ex- 
change, more  equable.  If  the  supply  of  them  be  small,  gold 
and  silver  vessels  are  less  in  demand;  a  part  of  the  old  ones 
are  melted  down,  and  vice  versa. 

In  durability,  the  precious  metals  surpass  almost  all  other 
commodities.  They  are  not  at  all  affected  by  air  or  water, 
and  they  can  be  corroded  only  by  very  few  fluids.  Fire  may, 
indeed,  change  their  form,  but  scarcely  in  any  degree  the 
value  of  the  material  of  gold,  and  that  of  silver  very  little,  and 
then  only  when  it  is  subjected  to  a  very  powerful  blast  or 
draught  of  air.  '^  ^  Hence,  while  by  laying  them  by,  they 
sufier  virtually  nothing  at  all  (a  most  valuable  article  is  an 
article  to  deposit  savings  in),  their  wear  and  tear  from  use  may 
be  very  much  decreased  by  an  admixture  with  other  metals 
in  the  proper  proportion.^  This  durability  contributes  largely 
to  keep  the  price  of  the  precious  metals  more  uniform.  By 
the  time  that  the  wheat  crop  is  rightly  harvested,  the  great 
bulk  of  the  previously  stored  wheat  is,  as  a  rule,  consumed; 
and,  therefore,  the  supply  of  wheat  depends  almost  entirely  on 

'  On  the  other  hand,  copper,  and  still  more  zinc,  tin  and  lead  lose  much  of 
their  value  in  the  fire.  Pearls  may  lose  their  entire  value  by  fire,  and  dia- 
monds more  than  half  of  it. 

'^  Aqua-regia,  a  mixture  of  nitric  and  muriatic  acid,  dissolves  gold.  Chlo- 
rine and  bromine  attack  it.  It  has  been  noticed  to  vaporize  at  a  very  high 
temperature.  A  gold  thread  vaporizes  when  a  strong  electric  current  is 
passed  through  it.  A  small  ball  of  gold  gives  off  a  great  deal  of  vapor  if 
placed  between  two  carbon  points  and  subjected  to  the  action  of  a  powerful 
galvanic  pile.     (K.  F.  Nmimajin.) 

^  Compare  HatcJieti,  Experiments  and  Observations  of  the  various  Alloys, 
On  the  specific  Gravity  and  comparative  Weight  of  Gold,  1863.  The  French 
five-franc  pieces  wear  away,  on  an  average,  in  a  year,  0.00016;  the  English 
crown,  o.oooiS;  the  half  crown,  about  0.00173;  and  the  shilling,  about  0.00456. 
(L.  Liverpool,  Treatise  on  the  Coins,  204;  M.  Chevalier,  Cours,  III,  12S  if.) 
The  wear  fron>  use  of  the  south  German  gulden  is  0.292  per  1,000.  (JRau, 
in  the  Archiv.  N.  F.  X,  256.)  According  to  yacob,  the  average  wear  of  coin 
is  2.38  per  1,000.  (Historical  Inquiry  into  the  Production  and  Consumption 
of  the  Precious  Metals,  ch.  23.) 


Sec.  CXX.]  THE  PRECIOUS  METALS.  361 

the  yield  of  the  last  crop.  On  the  other  hand,  it  is  probable 
that  there  is  many  a  piece  of  money,  the  raw  material  of  which 
was  dug  from  Thracian  gold  mines  in  the  time  of  King  Philip 
or  from  tlie  silver  mines  of  Spain  during  the  reign  of  Hannibal, 
in  circulation  to-day.  Compared  with  the  immeasurable  stores 
of  gold  and  silver  which  have  gone  on  accumulating  for  thou- 
sands of  3'ears,  the  new  yield  of  them,  in  any  one  year,  is  lost 
like  a  drop  in  a  bucket.  Hence,  only  w4ien  the  yield  of  the  mines 
has  continued  for  a  very  long  time,  or  when  it  is  exceedingly 
great  or  remarkably  small,  can  the  price  of  their  products 
change  to  any  great  extent.^°  Even  during  the  revolution  in 
prices,  between  1492  and  1560,  the  yearly  decline  in  their 
prices  was  only  one-half  of  one  per  cent,  per  annum. 

Their  great  pliability  of  form  has,  too,  very  important  ad- 
vantages for  our  purpose:  first,  that  they  can  be  divided  very 
accurately  into  very  small  parts,  and  that  the  volume  of  every 
part  corresponds  exactly  to  the  value  of  the  part ;  ^^  and  sec- 
ondly, that  they  take  an  impression  at  very  little  cost,  an  im- 
pression which  is  an  authoritative  and  trustworthy  expression 
of  their  weight  and  quality,  thus  saving  the  commercial  public 
the  perilous  trouble  of  weighing  and  testing  them  every  time 
they  are  used.  ^^^^^''    This  duty  the  state,  as  a  rule,  assumes. 

^^  Adam  Smith,  Wealth  of  Nations,  I,  ch.  11,  Digr. 

'^^  Solera,  Sur  les  Valueurs,  1785,  271  ff. :  Custodi.  Half  an  ox,  for  instance, 
is  worth  half  the  value  of  a  whole  one  only  for  a  few  well  defined  purposes. 
As  to  how  much  the  value  of  the  diamond  varies  with  the  size  etc.,  see  Du- 
frenoy,  Traite  de  Mineralogie,  II,  77  f.  On  the  other  hand,  the  separated 
parts  of  a  piece  of  metal  are  verj'  readily  reduced  to  a  whole. 

'^  In  the  case  of  the  ox,  it  is  impossible  to  imagine  a  mark  which  might  not 
be  eluded  by  its  losing  flesh. 

13  The  cost  of  coinage  since  1849  has  been  3/  of  i  per  cent,  in  the  case  of 
silver,  and  in  that  of  gold  not  quite  2  per  1,000.  (M.  Chevalier,  Cours,  III, 
no.) 

'*  Platinum  possesses  many  of  the  properties  necessary  to  an  instrument 
of  exchange  in  as  high  a  degree  as  gold  and  silver,  —  great  value  in  exchange, 
great  specific  gravity  and  great  durability.  On  the  other  hand,  its  pliability 
as  to  form  is  very  small,  and  therefore  the  cost  of  coining  it  would  be  high. 
The  conversion  of  platinum  coins  into  utensils,  and  of  utensils  into  coin, 


3(52  CIRCULATION  OF  GOODS.  [B.  II,  Cn.  III. 

(Coinage.)  When  its  authority,  however,  is  not  recognized, 
as  is  generally  the  case  in  international  trade,  gold  and  silver 
bars  are  even  now  used,  and  have,  therefore,  to  be  weighed 
and  tested.  ^^  ^"^ 


■svliich  would  contribute  to  the  supply  of  money  when  needed,  and  to  a 
diminution  of  that  supply  when  the  demand  decreased,  would  be  much  more 
difficult  on  this  account;  and  also  because  of  the  small  degree  of  beauty 
possessed  by  that  metal,  which  renders  it  little  adapted  to  purposes  of  luxury. 
Under  these  circumstances,  the  rarity  in  nature  of  the  metal  is  a  great  draw- 
back ;  for  the  discovery  of  a  new  mine  would  create  a  great  perturbation  in 
prices.  For  this  reason,  the  Russian  platinum  coins  have  been  generally 
very  much  undervalued  since  1S2S  in  the  commercial  world,  and  the  whole 
experiment  was  given  up  in  1845-46..  Compare  J.  ScJion,  National  OEkono- 
mie,  1 28  ff.  Aluminum,  discovered  by  Wohler,  and  which  can  be  prepared 
from  argillaceous  earth,  is  capable  of  manipulation  in  a  very  high  degree 
(malUable  et  ductile  d  feu  prhs  sans  limite^  excessivetnent  fusible),  almost  as  in- 
destructible as  the  precious  metals,  but  easily  distinguished  from  silver  by  a 
fine  bluish  color,  which  has  been  compared  to  that  of  tin;  by  its  small  spe- 
cific gravity,  from  2.5  to  2.67,  and  its  ring  like  that  of  iron.  Hence  it  is  very 
doubtful  whether  aluminum  can  be  made  to  play  the  part  of  a  substitute 
for  silver,  and  still  more  so  whether  it  can  be  used  for  coining. 

15  Lingot,  bullion.  In  India,  beyond  the  Ganges,  and  in  China,  bars  are 
very  much  used.  (Sycee.)  In  the  latter  country,  besides  these  bars,  there 
is  no  coinage  except  that  of  a  mixture  of  copper  and  lead,  for  small  change. 
(Th.  Smith,  An  attempt  to  define  some  of  the  first  Principles  of  Political 
Economy,  31.  Timkoxuski,  Reise  nach  China,  III,  366.)  Concerning  Bra- 
zilian trade  by  bars,  see  Sj>ix  und  Afartius,  Reise,  I,  346  f.  They  are  stamped 
with  the  national  coat  of  arms,  the  sign  of  the  mint,  the  number  by  which 
registered,  that  of  the  year  and  of  the  degree  of  fineness.  Concerning  the 
Persian  bars,  the  laries,  see  Noback,  Handbuch  der  Munzverrh.,  Ill,  Taf.  29. 
'*  Concerning  the  utility  of  the  precious  metals  for  purposes  of  money,  see 
Pliny,  A.  N.  XXXIII,  3 ;  Oresniius,  De  Mutatione  Monetarum,  ch.  2 ;  La-w, 
Sur  r  Usage  des  Monnaies,  683  f.  Daire,  where  we  read  that  before  the  in- 
vention of  money,  silver  had  served  all  kinds  of  useful  purposes,  but  that 
now  it  served  its  most  important  purpose,  namely  the  making  of  the  best 
material  for  money  on  many  accounts.  Yet  Law's  book.  Money  and 
Trade  considered  (1705)  is  based  mainly  on  the  idea  that  pieces  of  land  are 
much  better  adapted  for  purposes  of  money  than  the  precious  metals  (185)! 
Galliani,  Delia  Moneta,  1750,  I,  3,  4,  and  P.  Ncri,  Osservazioni,  1751  ft"., 
Cust.,  have  very  correct  ideas  on  this  subject. 


Sec.  CXXI.]        VALUE  IN  USE  AND  EXCHANGE.  363 

SECTION   CXXI. 

VALUE  IN  USE  AND  VALUE  IN  EXCHANGE  OF  MONEY. 

The  original  value  in  use  of  the  precious  metals,  to  satisfy 
certain  wants  of  luxury  in  the  most  esthetic  and  the  most  sub- 
stantial manner,  continues  still;  but  with  the  advance  of  civ- 
ilization, the  employment  of  gold  and  silver  for  this  purpose 
has  fallen  farther  and  farther  behind  the  more  recent  employ- 
ment of  these  metals  as  the  best  material  for  money.  And 
since  now  the  services  rendered  by  money  may  be  divided  into 
two  classes:  storing  up  or  preservation,  and  the  transmission 
(division,  concentration)  of  values,^  the  former  always  plays  a 
greater  part  in  the  earlier  states  of  the  development  of  trade 
by  money ;  and  the  latter  plays  the  larger  part  in  the  later 
stages  of  the  same  development.  We  may  best  compare 
money  to  the  other  machines  or  instruments  of  commerce.^ 

The  person  who,  in  times  when  there  is  a<  dearth  of  goods, 
and  especially  of  capital,  complains  of  a  want  of  money,  com- 
mits the  same  error  as  if  he  ascribed  a  scarcity  or  absence  of 
grain,  when  it  exists,  to  a  too  small  number  of  wagons  to  carry 
it,  or  to  the  narrowness  of  country  highways.  The  inference 
may,  indeed,  be  sometimes  well-founded,  but  certainly  only  by 
way  of  exception ;  and  yet  it  is  generally  the  first  which  politi- 

'  North,  Discourses  upon  Trade,  i6.  The  capacity  of  money  to  act  as  a 
storer  of  wealth  has  been  as  much  over-estimated  by  the  so  called  Mercantile 
System,  as  its  capacity  to  transfer  wealth  has  been  by  the  so  called  currency- 
school. 

*  Adam  StKtth  compares  money  to  a  large  wheel,  by  means  of  which  a  due 
share  of  the  means  of  subsistence  and  of  enjoyment  is  distributed  to  each 
member  of  society.  Elsewhere  he  compares  its  utility  to  streets  and  roads. 
(Wealth  of  Nations,  II,  ch.  2.)  Hume,  On  Money,  Pr.,  prefers  to  compare  it 
to  the  oil  with  which  the  wheels  of  circulation  are  greased.  Sisiiiondi  com- 
pares money  to  porters.  (N.  Principes,  II,  ch.  2.)  "  Money  is  to  commerce 
what  railways  are  to  locomotion,  a  contrivance  to  diminish  friction."  (y.  S. 
Mill.)  According  to  Schmitthenner,  455,  it  bears  the  same  relation  to  other 
commodities  that  the  written  language  of  a  people's  literature  does  to  their 
dialects. 


364  CIRCULATION  OF  GOODS.  [B.  II,  Cii.  III. 

co-economical  quacks  think  of  in  practice.^  Like  all  tools  or 
instruments,  money  constitutes  a  part  of  an  individual's  of  a 
nation's,  or  of  the  world's  capital.  Considered  from  the  point 
of  view  of  private  business  or  economy,  money  is  circulating 
capital,  but  from  the  point  of  view  of  the  world's  economy,  it 
is  fixed  capital.* 

^Latv's  views  on  money  are,  in  part,  excellent.  Thus,  for  instance,  he 
says  that  the  debasement  of  the  coin  from  financial  necessity  is  as  great  a 
folly  as  it  would  be  to  try  to  enlarge  a  piece  of  goods  too  small  for  the  pur- 
pose for  which  it  was  intended,  by  diminishing  the  length  of  the  yard-stick. 
(Sur  rUsage  des  Monnaies,  697.)  A  country  entirely  isolated  from  all  others 
could  get  along  as  well  with  one  hundred  pounds  sterling  as  with  a  million. 
(Money  and  Trade,  p.  8S.)  Elsewhere,  he  confounds  money  and  capital  to 
such  a  degree  that  he  considers  every  increase  of  the  amount  of  money  in  a 
country  as  an  enrichment  of  the  people,  a  means  to  give  employment  to  the 
poor,  to  carry  on  manufactures  etc.  (Money  and  Trade,  23,  26  fF.,  16S.)  A 
given  quantity  of  money  is  capable  of  giving  employment  at  most  only  to 
a  certain  number  of  men.  (21.)  A  nation's  power  and  wealth  depend  on 
the  population  and  its  stores  of  goods,  these  on  commerce,  and  commerce  in 
turn  on  the  amount  gf  money,  (pp.  no,  220.)  The  advice  given,  in  1848, 
to  the  National  Assembly  of  France,  but  which  it  had  the  good  sense  to 
reject,  to  overflow  all  France  with  the  so-called  bons  liypotMcaires,  is  akin  to 
Law's  practical  propositions.  M.  Chevalier^  Cours,  III,  8,  rightly  ridicules 
the  literal  construction  of  the  words :  Vargent  est  abondant,  when  merchants 
find  it  easy  to  obtain  credit,  and  considers  it  as  well  grounded  as  it  would  be 
to  infer  from  the  maxim :  Vargent  est  le  nerf  de  la  guerre^  that  rifles  and 
bullets  were  made  of  silver. 

■^  Adam  Smith  was  not  entirely  clear,  in  his  own  mind,  on  this  point.  Thus 
inconsistently  enough,  he  calls  money  unproductive  —  "  dead  stock,"  for  the 
reason  that  it  leaves  no  material  traces  behind  it  of  the  goods  which  it  has 
transferred  from  one  hand  to  another.  (II,  ch.  2.)  Is  not  the  same  true  of 
trade  itself .''  And  yet  Adam  Smith  calls  trade  productive.  His  error  is 
doubtless  a  remnant  of  the  Physiocratic  doch-ine,  to  which  Smith  still  held. 
Compare  ^ucsttay,  94,  ^d.  Daire.  Even  Tiviss  says  that  money  employed  as 
money  is  unproductive,  but  that,  when  employed  as  a  commodity,  it  is  pro- 
ductive. (View  of  the  Progress  of  Political  Economy,  since  the  sixteenth 
Century,  1847.)  Besides  it  is  not  a  peculiarity  of  money  alone,  that,  after  it 
has  served  the  purposes  of  production,  it  comes  out  of  the  product  unaltered. 
The  same  is  true  of  quicksilver  employed  in  amalgamation.  (Hermann,  2nd 
edition,  302.) 


Sec.  CXXII.]       VALUE  IN  EXCHANGE  OF  MONEY.  3G5 

SECTION  CXXII. 

VALUE  IN  EXCHANGE  OF  MONEY. 

The  value  in  exchange  of  money  is  said  to  be  high  when 
all  other  commodities  estimated  in  money  are  cheap ;  and  low 
in  the  opposite  case.  We  have  here  to  do  with  the  applica- 
tion of  the  most  general  of  all  laws  of  price ;  therefore,  with 
the  demand  and  supply  of  money.  The  demand  for  it  de- 
pends on  the  wants  and  the  means  of  payment  of  its  purchas- 
ers. Therefore,  if  a  country  has  little  trade,  it  will,  on  this  ac- 
count, need  only  few  instruments  of  trade,  that  is,  of  little  money 
to  efTect  exchanges.  If  it  be  poor  in  other  goods,  it  will  get 
little  money  in  exchange.  In  the  former  respect,  there  is  a 
beneficent  principle  of  equalization  or  compensation  which  de- 
creases the  price-variations  of  money,  no  matter  of  what  kind, 
in  the  necessity,  when  the  number  of  business  transactions  re- 
mains the  same  and  money  becomes  cheaper,  to  use  more  of  it, 
and  less  when  it  becomes  dearer.^  The  supply  of  money  is,  in 
the  long  run,  dependent  chiefly  on  the  cost  of  production. 
But  since  the  cost  of  production  in  different  mines  is  very  dif- 
ferent, the  value  in  exchange  of  the  precious  metals  is  deter- 
mined by  the  cost  of  producing  them  from  the  poorest  mines 
which  must  be  worked  in  order  to  supply  the  aggregate 
want  of  them.     (See  §  i  lo.)  ^    The  more  unfavorable  the  con- 

^  Senior,  Three  Lectures  on  the  Value  of  Money,  1840,  is,  in  so  far,  not 
■wrong  when  he  says  that  the  value  in  exchange  of  the  precious  metals  is 
still  ultimately  determined  by  the  want  of  such  commodities  as  are  luxuries. 
This  last  determines  to  what  extent  the  production  shall  be  extended  by  the 
working  of  the  poorest  mines,  whereas  the  wants  of  circulation  can  be  met 
as  well  by  small  as  large  quantities  of  the  metals. 

'  The  good  or  bad  result  of  this  production  depends  on  many  different  ele- 
ments which  may  compensate  on  another.  In  California  and  Australia  gold 
is  to  be  found  in  large  quantities,  and  is  easily  mined;  but  the  workmen 
make  large  demands  which  the  nature  of  the  country  renders  it  difficult  to 
meet.  In  the  Harz  mines,  where  the  cost  is  scarcely  covered,  (Lehzen,  Han- 
nover's Staatshaushalt,  1853,  I,  139),  the  shafts  are  sometimes  I75>^  fathoms, 


[]QQ  CIRCULATION  OF  GOODS.  [B.  II,  Cii.  III. 

ditions  of  their  production  are,  the  greater  is  the  quantity  of 
commodities  which  must  be  given  for  a  pound  of  gold,  sil- 
ver etc. ;  that  producers  may  not  be  deterred  from  the  prose- 
cution of  their  work.  The  extremes  of  the  value  in  ex- 
cliange  of  money  are  dependent  on  the  use  for  which  it  is  in- 
tended. That  value  cannot  rise  higher  than  to  the  point  at 
which  single  pieces  of  money  become  inconvenient  on  account 
of  their  smallness,  nor  sink  lower  than  the  point  at  which  a 
similar  inconvenience  is  produced  by  their  too  great  size.  In 
both  instances,  it  would  become  necessary  to  have  recourse 
to  other  instruments  of  exchange. 


SECTION  CXXIII. 

THE  QUANTITY  OF  MONEY  A  NATION  NEEDS. 

How  great  the  amount  of  money  needed  in  the  entire 
economy  of  any  state  is,  cannot  be  always  rightly  determined, 
either  by  the  am.ount  of  the  national  resources,  or  by  the 
number  of  the  population.^  It  is  a  very  easy  thing  to  refute 
the  opinion,  that  the  aggregate  amount  of  cash  money  in  a 

deep,  but  this  is  made  up  for  in  a  measure  by  the  moderate  demands  of  the 
■workmen  and  their  skill  in  mining.  Among  the  Mandingos,  the  auriferous 
material  is  so  rich  that  i^  per  i,ooo  of  the  weight  of  the  sand  is  washed  out  in- 
to pure  gold  in  ten  minutes  (M.ParA,  Journal,  53  ft",  addenda,  XIX),  while  in 
Europe,  where  the  proportion  is  only  jJq  per  1,000,  mines  are  still  considered 
Avorth  working.  But  then,  what  workmen  there  are  there!  In  Peru,  the 
burdensome  height  of  the  mines  above  the  level  of  the  sea  and  the  want  of 
combustible  material  more  than  counterbalance  many  favorable  advantages, 
while  in  Norway  the  cheapness  of  wood  compensates  for  a  great  many  dis- 
advantages. Another  thing  which  contributes  towards  the  uniformity  of 
the  price  of  the  precious  metals  is  the  circumstance  that  the  great  amount 
of  fixed  capital  required  in  the  greater  number  of  mining  enterprises,  post- 
pones for  a  long  time  the  working  of  good  mines  as  well  as  the  abandon- 
ment of  poor  ones. 

'  Older  writers  have  estimated  the  amount  of  monej'  necessary  in  a  coun- 
try at -^j   ^-^  ( Petty )^  ^5j,and  even  J^  of  the  yearly  income  of  a  people. 
(Adam  Siiiiili,   II,  ch.  2.)     According  to  Cantillon^  Sur  la  Nature  du  Con' 
merce,  p.  73,  it  is  from  \  to  -^^  of  the  annual  gross  production  of  a  nation. 


Sec.  CXXIII.]         THE  MONEY  A  NATION  NEEDS.  367 

country  constitutes  an  equivalent  of  the  aggregate  amount  of 
all  other  commodities  to  be  found  there  at  any  time,  in  such  a 
way  that  the  two  pans  of  this  great  scales  (Locke)  hang  al- 
ways in  a  state  of  equilibrium,  and  that  an  increase  of  the 
amount  of  money,  the,  am.ount  of  all  other  commodities  re- 
maining the  same,  must  be  productive  of  an  exactly  corres- 
ponding decrease  in  the  value  of  each  piece  of  money .^    Think 

^  Davanzatt,  Lezione  sulle  Moneta,  15SS,  32  ft",  Cust.,  thinks  that  all  terres- 
ti"ial  things  ■svhich  serve  to  satisfy  the  ^vants  of  men  are,  by  virtue  of  agree- 
ment, equal  in  value  to  all  the  gold,  silver  and  copper;  and  that  the  parts 
comport  themselves  as  tlie  whole.  The  price  of  a  commodity  is  based  on 
this,  that  men  find  in  it  as  much  of  their  beatitiidiiie  as  is  afforded  them  by  a 
given  quantum  of  gold  etc.  Similarly,  Montanari^  who  adds  as  a  limitation 
the  quantity  of  money  spcndibile  in  csmmercio.  (Delia  Moneta,  45,  64,  Cust.J 
The  same  opinion  leads  Locke  to  the  singular  conclusion,  that,  as  there  is 
now  in  the  world,  ten  times  as  much  silver  as  there  was  previous  to  the  dis- 
covery of  America,  each  single  piece  of  silver,  separately  considered,  and 
taken  in  relation  to  such  commodities  as  have  not  varied,  is  worth  only  one- 
tenth  of  what  it  was  then.  Locke,  here,  starts  out  with  the  gi'oss  assumption, 
shared  even  by  GaniUi,  Theorie,  II,  3S6  ft",  that  in  the  case  of  money  the  de- 
mand is  always,  relatively  speaking,  equally  strong  and  just  as  great  as  the 
supply,  or  as  the  amount  in  the  market.  (Works,  II,  23  ft'.)  Further,  Mon- 
tesquieu, Esprit  des  Lois,  XXII,  7,  8.  Per  contra,  however,  see  Moiitesquieti, 
ibid.  XXII,  5,  6,  and  Hume,  On  INIoney  and  on  the  Balance  of  Commerce, 
Essays  II,  1752. 

Hume  knew  perfectly  well,  that  only  circulating  money  and  circulating 
commodities  operated  on  price,  but  failed  to  take  the  rapidity  of  circula- 
tion into  account.  Similarly,  Forbonnais,  Elements  du  Commerce,  II,  212; 
even  Canard,  Principes,  ch.  6;  Fichte,  Geschloss.  Handelstaat,  93  ft".,  and 
Stein,  Lehrbuch,  58.  Contested  by  La-v,  Trade  and  Monej'  considered,  140,  a 
work  directed  especially  against  the  Mercantilistic  essay,  Britannia  languens ; 
16S0,  by  M6lon,  Essai  politique  sur  le  Commerce,  ch.  22 ;  Gcnovesi,  Econo- 
mia  civile,  1764,  II,  1,  15;  Stcuart,  Principles,  II,  ch.  28;  Vcrri,  Meditazioni, 
XVII,  3  ft".;  BUsch,  Gedlumlauf,  II,  40.  The  simple  taking  of  an  inventory 
of  most  private  resources  which  possess  so  much  greater  value  in  other  com- 
inodities  than  in  money  is  enough  to  demonstrate  the  error  of  DavanzaiPs 
doctrine.  Thus,  in  France,  in  Necker's  time,  the  cash  money  in  the  kingdom 
was  estimated  at  2,200,000,000  livres,  and  the  average  value  of  the  wheat 
crop  alone  at  1,000,000,000.  Neckcr,  Legislation  et  Commerce  des  Grains, 
1776,  I,  215.  Recently,  Michel  Chevalier,  estimated  the  amount  of  money  in 
France  at  irom  ^tYz  to  4  milliards,  while  the  official  estimate  of  its  immovable 
property  alone  was  over  83  milliards. 


368  CIRCULATION  OF  GOODS.  [B.  II,  Ch.  III. 

only  of  the  great  many  commodities  which  are  obtained  and 
consumed  without  any  exchange  whatever !  Rather  does  the 
amount  of  money  necessary  to  keep  the  value  in  exchange  of 
the  money  emplo3^ed  in  a  people's  public  economy  unaltered,^ 
depend  on  the  cooperation  of  the  following  conditions: 

A.   The  number  and  extent  of  such  coinniercial  transactions 
as  are  ejfected  by  means  qfmoneyi^a.  relation  which,  evidently, 
increases  (see  §  56,  ft'.)  with  every  advance  in  the  division  of 
labor.     Hence  the  transition  from  serfdom  and  socage  service 
to  free  labor,  from  domestic-servant  labor  to  day-labor  and 
piece-work,  from  feudal  military  service  to  that  of  paid  and 
standing  armies,  from  land-privileges  and  allowances  in  pro- 
duce, such  as  fire-bote  etc.,  to  the   payment  of  officials  in 
money,  from  dues  in  produce  to  taxes  in  money,  and  regular 
lease-hold  interests,  from  requisitions  to  loans  of  money;  in  a 
word,  from  the  barter-economy  (Naturalwirthschaft)  of  the 
middle  ages  to  the  trade  by  means  of  money  in  the  higher 
stages  of  civilization,  that  is,  from  the  "  feudal "  to  the  "  com- 
mercial "  system  must,  of  itself,  increase  the  money-need  (Geld- 
bedarf)  of  a  people. 

B.  The  rabidity  of  the  circidation  of  money;  because,  in 
most  commercial  transactions,  one  dollar  which  circulates  ten 
times  a  year  really  performs  the  same  service  as  ten  dollars 
which  go  from  hand  to  hand  once  in  a  year;  just  as  the 
economic  use  of  a  ship  employed  in  the  transportation  of 
commodities  does  not  depend  on  its  commdiousness  alone 
but  on  its  rapidity  also.^     The  economic  use  of  money  does 

3  When  money  becomes  dearer,  less  of  It  is  of  course  needed ;  and  when 
cheaper,  more,  for  the  same  purpose. 

*  In  contradistinction  to  presents,  acts  of  spoliation,  but  especially  to  barter. 

5  The  discoverer  of  this  truth  is  supposed  by  many  to  be  Banditti,  Discorso 
economico,  1737, 141  f.,  Cust.  Berkely,  however,  in  the  Querist,  1735,  477  f., 
writes:  "A  sixpence  twice  paid  is  as  good  as  a  shilling  once  paid."  Much 
earlier  yet,  in  1797,  Boisguillebert,  Detail  de  la  France,  II,  19,  had  the  germ 
of  this  doctrine,  but  he  confounds  circulation  with  consumption.  Kx\6.Locl:e, 
Considerations,  II,  13  ff.,  presented  it  in  1691  with  great  clearness,  although 
he  did  not  always  remain  true  to  his  theory.  Compare  ^uesnay,  6d.  Daire, 
64;  Cantillon,  159^.,  382. 


Sec.  CXXIII.]        THE  MONEY  A  NATION  NEEDS.  359 

not  depend  on  its  amount  simply.  Says  Sisiiiondi:  "  The 
amount  of  the  medium  of  circulation  in  a  state  must  be  equal 
to  the  sum  of  the  payments  made  in  it  in  a  given  time,  di- 
vided by  the  sum  of  the  times  the  former  has,  on  an  average, 
changed  owners  within  that  time."^  Under  given  economic 
circumstances,  the  rapidity  of  the  medium  of  circulation  is, 
taken  all  in  all,  not  by  any  means  an  arbitrary  matter.  It 
will  happen  very  seldom  that  one  man  will  purchase  or  con- 
sume a  commodity  in  order  that  another  may  not  want 
money.'''  Were  the  greater  number  of  money-earners  (and  in 
nations  with  a  healthy  economic  life  this  number  is  always 
made  up  of  men  noted  for  the  good  management  of  their 
own  affairs)  inclined  to  pay  out  the  money  which  they  had 
taken  in,  rapidly,  a  very  active  production  w'ould  prevail 
everywhere;  and  this,  in  turn,  supposes  general  commercial 
freedom  and  great  legal  security.  The  less  these  conditions 
are  developed,  the  more  difficult  it  becomes,  not  only  to  lay 
out  the  money  received  to-day  productively  to-morrow,  but 
the  more  imperative!}"  does  a  proper  foresight  demand,  that  a 
reserve-fund  should  be  maintained  for  times  of  necessity. 
(See  §  43.)^  Even  in  the  same  age  and  among  the  same 
people,  money  moves  most  slowly  under  the  influences  of 
troublesome  and  critical  epochs;  for  the  dangers  of  war 
and  sedition,  of  impending  burdensome  taxation,  commercial 
gluts  and  numerous  cases  of  bankruptcy  uniformly  operate 
to  make  the  possessors  of  money  hold  anxiously  to  their 
present  supply.® 

In  less  civilized  countries,  the  same  condition  of  things  leads 

^  If  the  nvimber  of  annual  exchanges  effected  by  i  dollar  =  u;  the  total 
number  of  dollars  in  the  store  of  money  =  m ;  the  rapidity  of  circulation, 
that  is  the  number  of  exchanges  effected  on  an  average  by  each  dollar  in  a 

..u       •  u  u 

year,  =  s :  then  is  u  =  m  s,  s  =  — ,  m  =  — 

m  s 

'  Since  good  money  is  so  easily  stored  away  and  preserved,  no  one  is  in 
haste  to  get  rid  of  it.    St.  Chanians.,  N.  Essai  sur  la  Richesse  des  Nations,  122  ff. 
*  Among  the  Kurds,  all  the  money  in  their  camps  is  used  for  head-orna- 
ments for  their  women.     (K.  Rttter,  Erdkunde,  X,  887.) 

'Thus,  Sir  David  Xorth^  Discourse  on  Trade,  1691,  Postscr. 
Vol.  I.— 24 


370  CIRCULATION  OF  GOODS.  [B.  II.,  Ch.  III. 

the  people  even  to  bury  their  money-treasures.  In  large 
cities,  the  circulation  of  mone}^  is  generally  more  rapid  than 
in  the  country  districts ;  in  a  thickly  populated  than  in  a  thinly 
populated  country;  and  in  trade  than  in  agriculture.^*^  Every 
improvement  in  the  means  of  intercommunication  tends  to  facil- 
itate it.  The  rich  man  possesses,  as  a  rule,  less  money,  rela- 
tively speaking,  than  the  poorer  man.  Hence,  a  more  equable 
division  of  a  nation's  resources  among  the  people  would  in- 
crease the  amount  of  money  needed,^^  While  the  concentra- 
tion, as  to  time,  of  circulation  into  few  great  terms  of  payment 
is  calculated  of  itself  to  cause  a  large  sum  of  money  to  remain 
idle  in  the  interval,^^  its  concentration  in  space  in  large  com- 
mercial cities  must  dispense  with  the  necessity  of  a  great  num- 
ber of  instruments  of  exchange.  In  England,  it  is  customary 
for  every  man  in  comfortable  circumstances,  as  soon  as  he  re- 
ceives any  money,  to  deposit  with  a  banker,  and  to  make  all 
his  payments  by  means  of  checks  upon  the  latter.  Cash 
money  is  now  emplo3^ed  by  Londoners  only  in  pa3'"ment  of 

^'^  Lotz^  Handbuch,  377,  is  of  opinion  that  even  in  England  £100,000  em- 
ployed in  trade  in  land  can  scarcely  effect  exchanges  to  the  amount  of  £1,- 
000,000  in  a  year.  The  same  sum  employed  for  the  same  purpose  in  London, 
in  stocks  and  in  the  trade  in  commodities,  will  effect  exchanges  to  the  amount 
of  £160,000,000. 

'1  Cernuschi^  Mecanique  de  I'Echange,  1865,  132  ff. 

'^Thus  Petty  (ob.  16S7)  is  of  opinion  that  England  needed  as  much 
money  as  ]/i  of  all  its  ground-rents  amounted  to,  as  the  J^  of  all  house-rents, 
and  ■j'j  of  all  the  wages  of  labor  for  a  year;  for  the  reason  that  ground-rents 
are  paid  semi-annually,  house-rents  quarterly,  and  wages  weekly.  (Several 
Essays,  179;  Political  Anatomy  of  Ireland,  116.)  Locke,  on  the  other  hand, 
assumes  -^^  of  the  wages  of  labor,  ^  of  all  the  revenue  of  land  owners,  and 
5^;,-  of  the  amount  cash  money  taken  in  in  a  year  by  merchants.  Of  these 
Umounts,  there  should  be  always,  at  least,  one-half  in  ready  money  on  hand, 
if  commerce  would  not  be  brought  to  a  stand-still.  If  leases  were  to  be  paid 
for  on  short  terms,  a  great  saving  of  money  would  be  possible.  (Works,  II, 
13  ff.)  Pinto,  Traite  du  Credit  et  de  la  Circulation,  34,  calls  special  attention 
to  the  case  of  Tournay,  in  which  the  commandant,  during  the  siege  of  1745, 
made  7,000  florins  serve  him  for  seven  weeks  to  pay  the  garrison;  by  bor- 
rowing that  sum  anew  every  week  from  the  inn-keepers  etc. ;  which  they, 
again,  had  received  from  the  soldiers. 


Sec.  CXXIIL]         THE  MONEY  A  NATION  NEEDS.  371 

•wages,  and  in  trade  between  retail  dealers  and  consumers. 
The  banker  is  there  the  common  cashier  of  a  great  number  of 
private  individuals,  and  is  in  a  condition  to  make  their  pay- 
ments for  them  with  a  much  smaller  amount  of  money,  espe- 
cially when  they  are  to  be  made  by  one  of  his  depositors  to 
another.^^  This  "  union  of  money-chests  "  (Kasseiivereimgung) 
has  been  effected  also  on  a  larger  scale ;  inasmuch  as  bankers, 
in  greater  or  smaller  numbers,  are  wont  to  have  one  bank  as 
a  center ;  and  the  country  banks,  in  turn,  to  be  in  constant  rela- 
tion with  the  great  moneyed  institutions  of  London,  subject  to 
a  species  of  general  superintendence  by  the  Bank  of  England. 
These  great  monetary  institutions  have,  so  to  speak,  a  common 
rendezvous  at  the  Clearing-House,  where  the  greater  part  of 
their  payments  are  made  by  a  mere  off-setting  of  debits  and 
credits;^*  and  this  bank  is,  as  it  were,  the  cashier-in-chief  of 
the  nation,  and  in  possession  of  almost  the  entire  cash  stores  ^^ 
of  the  English  people.-'^ 

'2  If  all  were  to  commit  their  payments  to  the  care  of  the  same  banker,  it 
would  be  possible  to  do  with  almost  no  money.  But  even  now,  if  lOO  sep- 
arate merchants  were  obliged  to  keep  each  3,000  dollars  in  their  money-chests 
for  unforseen  contingencies,  a  banker  might  accomplish  the  same  for  them 
with  50,000  dollars,  because  it  is  not  probable  that  the  unforseen  contingen- 
cies in  question  would  occur  to  all  at  the  same  time. 

'*In  the  London  Clearing-House,  in  1839,  £954,401,600  were  paid  by  means 
of  the  use  of  £66,275,600  as  a  circulating  medium,  for  the  most  part  notes 
of  the  Bank  of  England.  ('Zbf/^e,  Inquiry  into  the  Currency  Principle,  27.) 
From  May,  1868,  tin  til  May,  1869,  £75068,078,000.  (Statist.  Journal,  1869, 
229.)  The  New  York  Clearing  House,  in  1867,  effected  payments  to  the 
amount  of  £5,735,031,900  (Ibid.,  1867,  577),  and  in  1868,  $30,880^00,000. 
(Hildebnmd's  Jahrb.,  1869,  II,  168.) 

'5  This  system  began  in  the  middle  of  the  seventeenth  century.  (A  Dis- 
course of  Trade  Coyn  and  Paper  Credit,  64.)  As  early  a  writer  as  Sir  y. 
Child^  N.  Discourse  on  Trade,  46,  says,  that  for  some  time,  every  man 
who  had  from  £50  to  £100  in  money,  sent  it  to  his  banker,  and  that  since 
that  time,  all  the  money  flowed  towards  London  and  the  country  was  de- 
prived of  it.  (127  ff.)  As  a  rule,  the  goldsmiths  were  also  bankers.  One 
such  smith  had  at  the  time  of  the  Great  Fire  of  1666,  emitted  £1,200,000  in 
notes.  (A  Discourse  etc.,  67.)  The  Bank  of  England,  as  a  money  center, 
dates  froin  1694.    The  London  banks  developed  into  intermediaries  princi- 


373  CIRCULATION  OF  GOODS.  [B.  II,  Ch.  III. 

C.  The  quantity  and  rabidity  of  circtdation  of  the  representa- 
tives of  money.  These,  in  so  far  as  they  are  worthy  of  the 
name  here  given  them,  depend  on  the  credit  of  those  who  issue 
them ;  that  is,  on  the  certainty  that  they  shall,  at  the  time  fixed, 
be  redeemed  in  money.  To  this  category  belong  the  paper 
money  of  the  state  which  bears  no  interest,  and  the  treasury- 
notes  of  the  state  which  do  bear  interest,  bank  notes,  bills  of 
exchange,  promissory  notes,  book-credits  of  private  persons, 
sometimes  even  certificates  of  the  storage  of  goods  in  public 
stores.  It  is  estimated,  that,  at  the  present  time,  nine-tenths 
of  all  the  payments  made  in  Great  Britian  are  effected  with- 
out the  aid  of  money,  or  even  of  bank-notes.^®  The  capacity 
of  a  person  to  make  purchases  does  not  depend  simply  on  the 

pally  before  the  time  of  the  French  Revolution.  (Thornto7i^  Paper-Credit  of 
Great  Britain,  1802.)  This  remarkable  institution  had  grown  to  vast  dimen- 
sions even  in  Thornton's  time,  although  it  has  been  much  enlarged  since 
1825.  (Tooke,  History  of  Prices,  152  f.)  Similar  conditions  among  almost 
all  highly  civilized  peoples.  Thus  in  Greece,  compare  Becker,  Charicles,  I, 
294.  Concerning  a  person  who  had  14  talents'  worth  of  resources,  26  minae, 
and  therefore  three  per  cent,  in  cash,  see  Lysias,  adv.  Diog.,  6.  In  Rome, 
compare  Polyb.,  XXXII,  13.  Cicero,  pro  Font.,  I,  i.  For  Italian  analogous 
cases,  part  of  which  may  be  traced  back  as  far  as  the  twelfth  century,  see 
Lobero,  Memorie  storiche  della  Banca  de  S.  Georgio,  1832;  or  the  Dutch 
"  cassiere  "  Richesse  de  Hollande,  I,  376,  ff.  In  France  an  ever  increasing 
centralization  of  the  money-trade  is  to  be  noticed  in  Paris  (M.  Chevalier, 
Cours.,  Ill,  418);  and  now  of  the  money-trade  of  Germany  in  Berlin. 

'fi  Compare  Fullarton,  On  the  Regulation  of  Currencies,  1845.  Among 
the  Dutch,  the  custom  of  using  all  commercial  commodities  as  much  as  pos- 
sible, as  a  basis  of  the  circulating  medium,  was  much  earlier  developed. 
(Child,  Discourse  on  Trade,  65,  264  f)  In  Great  Britain,  the  aggregate 
amount  of  bills  of  exchange  put  in  circulation  was,  in  1S39,  £528,000,000, 
which  sum  has  been  increased  annually  at  the  rate  of  about  £24,000,000. 
(Tooke,  Inquiry  into  the  Currency  Principle,  26.)  Between  1828  and  1847, 
there  circulated  at  the  same  moment,  on  an  average,  £79,127,000  in  bills  of 
exchange  in  England,  and  in  Scotland,  £17,380,000  (Athenaeum,  1850,  No.  175), 
and  in  Great  Britain  and  Ireland,  from  £180,000,000  to  £200,000,000.  (Tooke, 
History  of  Prices,  VI,  588.)  According  to  Macleod,  the  bills  of  exchange 
and  promissory  notes  together  amounted  to  £500,000,000;  bills  of  exchange, 
bank-notes  and  bank-credits,  to  over  £600,000,000.  (Elements,  12,  325.) 
Macleod  calls  the  currency  the  sum  total  of  all  debts  due  by  every  individual 
in  the  country.     (Elements,  43.) 


Sec.  CXXIV.]        THE  MONEY  A  NATION  NEEDS.  37p, 

amount  of  money  he  possesses,  but  on  his  credit  likewise. 
The  person  who  buys  on  credit,  contributes  as  much  to  raise 
the  price  of  commodities  as  the  person  who  buys  for  cash ; 
with  this  exception,  however,  that  when  the  former  eventually 
fails  to  redeem  his  promise  to  pay,  the  price  raised  by  him 
quickly  falls  again."  And,  indeed,  all  the  various  forms  of 
credit,  mentioned  above,  agree  essentially  in  this,  however 
they  may  differ  from  one  another  in  costliness  and  rapidity  of 
circulation. 

SECTION  CXXIV. 

THE  QUANTITY  OF  MONEY  A  NATION  NEEDS. 

(CONTINUED.) 

Of  the  three  conditions  above  mentioned,  it  is  evident  that 
the  first  operates  on  the  amount  of  money  needed,  in  a  direc- 
tion opposite  to  that  of  the  other  two.  The  usual  course  of 
development  is  this:  among  an  advancing  people,  the  number 
of  money  transactions  increases  at  first;  later,  when  education 
has  become  general,  and  the  people  have  grown  habituated 
to  the  giving  and  receiving  of  credit,  the  circulation  of  money 
is  accelerated,  and  an  increase  of  the  substitutes  for  money 
efTected.  Hence,  it  is  perfectly  natural  that  the  money-need 
of  a  people  whose  public  economy  is  only  half  developed, 
should,  in  proportion  to  the  number  of  inhabitants,  be  greater, 
not  only  than  that  of  a  people  whose  economy  is  wholly  unde- 
veloped, but  also,  than  that  of  a  people  whose  public  economy 
has  been  carried  to  the  highest  point  of  perfection.^  ^ 

"  A  case  in  England,  in  1857,  in  which  a  liouse  -with  £10,000  capital  failed 
with  liabilities  amounting  to  £900,000.  (Report  of  the  select  Committee  on 
the  Bank  Act,  1S5S,  XV.)  Or  where  a  speculator  with  £1,200  made  pur- 
chases on  credit  to  the  amount  of  £80,000,  and  then  failed  with  a  deficit  of 
£16,000.     (Faivcett,  Manual,  442  f.) 

1  Remai-ked  by  as  early  a  writer  as  Davenant,  Works,  IV,  106  ff.  Com- 
pare, however,  II,  23S.  ^uesnay,  €d.  Daire,  75  ff.  Lord  King,  Thoughts  on 
the  Effects  of  the  Bank  Restriction,  1804,  17  ff.  Exhaustively  treated  by 
Chevalier^  Cours.,  Ill,  397  ff.     He  very  much  laments  the  fact  that  the  cus- 


374  CIRCULATION  OF  GOODS.  [B.  II,  Ch.  III. 


SECTION  CXXV. 

UNIFORMITY  OF  THE  VALUE  IN  EXCHANGE  OF  THE 
PRECIOUS  METALS. 

The  peculiar  properties  of  the  precious  metals  described 
above  (§  120),  explains  satisfactorily  enough,  why,  at  the  same 

toms  of  France  cause  it  to  need  from  3^  to  4  milliards  of  cash  money,  while 
England  does  a  much  larger  trade  with  1,200  millions.  (I,  207  ff.)  In 
France,  it  is  said  that  the  amount  of  money,  in  1S12,  was  1,500,000,000 
francs(.'').  (Peuchet,  Statistique  elementaire,  473.)  In  Prussia,  in  1805,  it 
was  90,000,000  thalers.  (Krug^  Betracht.  iiber  den  Nationalwohlstand  des 
preuss.  St.,  I,  244.)  The  annual  amount  of  production  in  the  former  coun- 
try was,  7,036,000,000  francs ;  in  the  latter  it  was  estimated  at  261,000,000 
thalers,  so  that  in  Prussia  the  relation  of  money  to  national  income  was,  as 
1 :  2.9;  in  France,  as  i :  4.69. 

2  It  is  scarcely  possible  to  determine  exactly  the  amount  of  money  in  a 
country ;  for  the  reason  that,  outside  of  the  suppositions  of  bankers  etc., 
there  is  no  authority  which  can  be  safely  relied  on,  unless  it  be  the  reports 
concerning  the  coinage,  and  of  the  emission  of  paper  money.  The  informa- 
tion, no  less  necessary,  to  be  derived  from  the  statistics  of  the  importation 
and  exportation  of  money,  the  melting  down  of  coin  by  gold  smelters  etc., 
can  never  be  exactly  obtained.  In  England,  at  the  end  of  the  sixteenth  cen- 
tury, the  circulating  medmni  was  estimated  at  £4,000,000  (Hume,  History  of 
England,  ch.  44,  App.) ;  under  Charles  II.,  at  £6,000,000,  when  the  popula- 
tion was  6,000,000.  ('jPe//}',  Several  Essays,  179.)  About  171 1,  Davenatit, 
New  Dialogues,  11  fF.,  mentions  £12,000,000  as  the  amount;  and  Ajiderson, 
Origin  of  Commerce,  a.,  1659,  £16,000,000  in  1762.  The  circulation  of  gold, 
shortly  before  1797,  was  estimated  by  Rose  at,  at  least,  £40,000,000;  by  Lord 
Liver;pool,  at  £30,000,000;  by  Toohe,  at  only  £22,500,000.  (History  of  Prices, 
V,  130  ft")  Morcau  de  Jonnis,  1S37,  assumed  £43,500,000  (Statistique,  I,  329), 
and  Helferich  (Schwankungen  der  edlen  Met.,  1843,  147),  £45,000,000.  Sir 
Robert  Peel,  estimated  the  amount  in  1S45  at  £59,000,000,  to  which  was  to  be 
added  an  average  of  £28,000,000  in  bank  notes,  after  deduction  made  of  the 
metallic  reserve.  According  to  yevons,  the  amount  of  British  money  is  now 
£80,000,000  in  gold,  £14,000,000  in  silver,  £1,000,000  in  copper;  the  sum  total, 
including  bullion  and  bank  notes,  after  the  deduction  of  their  metallic  repre- 
sentatives, £134,000,000.  (Economist,  December,  186S,  July,  1869.)  In 
France,  Vauban,  Dime  royale,  104  (Daire),  estimated  the  cash  money  at 
about  500,000,000  livres,  over  750,000,000  francs,  with  which  Voltaire,  Siecle 
de  Louis,  XIV,  ch.  30,  agrees  so  far  as  the  year  16S3  is  concerned.  In  1730, 
Voltaire,  assumes  the  amount  to  be  1,200,000,000  of  the  coins  of  that  time. 


Sec.  CXXV.]      VALUE  IN  EXCHANGE.  375 

time,  but  in  different  countries,  they  liave  more  nearly  the 
same  value  in  exchange  than  any  other  commodity  whatever. 
Like  a  fluid  in  tubes  which  communicate  with  one  another, 
the  precious  metals  seek  the  one  same  level  of  value  the  whole 
world  over.^  O^ly^  it  must  not  be  supposed  that  every  abso- 
lute or  relative  increase  of  the  amount  of  money  in  a  country 
must  produce  immediately  a  corresponding  diminution  of  the 
value  of  money;  and  in  addition  to  this  cause  an  exportation 
of  money.  ^  If  the  number  of  trade-transactions  increases  in 
the  same  proportion  as  the  amount  of  money,  the  value  of 
money  remains  entirely  unaffected.^  The  same  thing  occurs 
when  the  increased  influx  of  money,  instead  of  overflowing 
the  channels  of  circulation,  only  swells  the  volume  in  the 

Nechcr,  Administration  des  Finances,  III,  66,  estimated  it,  in  17S4,  at 
2,200,000,000  livres;  MolUen,  about  1806,  at  2,300,000,000.  The  valuations  in 
Louis  Philippe's  time  varied  from  2,400,000,000  to  2,500,000,000  (Chamber 
of  Deputies,  April,  13,  1S47),  and  4,000,000,000.  (Blanqui.)  The  valuations 
of  1S70  were,  according  to  Wolovjshi^  4  milliards;  and  to  Bonnet^  from  5  to  6 
milliards.  Compare  1Voloxvsh\  L'Or  et  1' Argent,  3S3  ff.,  Euqu6te,  42.  The 
German  Zollverein  is  said  to  have  had,  at  the  beginning  of  1870  (Soetbeer) 
480,000,000  or  520,000,000  thalers  (WcibezaJtn)  cash  money. 

In  Wirtemberg,  Mcmmiiiger,  1S40,  estimated  the  resources  of  the  country 
at  1,600,000,000  guldens,  of  which  36,000,000  were  cash;  and  the  yearly  gross 
income  at  179,000,000  guldens;  so  that  the  money  Avas  20  per  cent,  of  the 
latter  and  2}^  per  cent,  of  the  former.  The  annual  sales  =  226,000,000. 
Therefore  the  coin  currency  must  have  circulated  on  an  average  between  six 
and  seven  times  in  a  year.  In  the  electorate  of  Hesse,  there  were  fer  capita 
4  thalers,  18  sgrs.,  9  hellers,  metallic  money,  and  3  thalers,  9  sgrs.,  4  hellers, 
paper-money.  (B.  Hildehrand^  Statist.  Mitth.,  1853,  1S5.)  The  amount  of 
money  in  Naples,  in  1840,  was  estimated  at  42,000,000  ducats.  (Scialoja.)  It 
has  been  estimated  that,  in  1S30,  Spain  possessed  1,725,000,000  francs.  (Bar- 
rego  von  Rottenkamp^  330-) 

'  Montatiari,  Delia  Moneta,  52  if. 

^  David  Huine's  very  In^uQntxaX  essay  on  the  balance  of  ti-ade  does  not  give 
expression  to  this  error,  but  he  certainly  was  the  occasion  of  making  a  great 
many  of  his  disciples  advocate  it.  It  is  related  to  the  error  mentioned  in 
§  123.  S^ucsuay,  loi  (Daire)  saw  this  point  in  a  much  clearer  light.  So  did 
Graumann^  Gesammelte  Briefe  vom  Gelde  (1762),  12  ff.;  73  If. 

3  This  is  seen,  for  instance,  when  paper  money  is  issued,  in  times  when 
trade  is  thriving,  and  is  withdrawn  when  this  conjuncture  ceases. 


376  CIRCULATION  OF  GOODS.  [B.  II,  Ch.  III. 

ready-money  reservoirs.  By  means  of  these  stores  of  ready 
money,  very  large  payments  may  be  made  by  one  nation  to 
another,  without  changing  the  circulation,  or,  therefore,  the 
value  of  money,  in  the  slighest  degree,  on  either  side.  *  If, 
indeed,  such  payments  should  continue  for  a  long  time  to  flow 
in  the  same  direction,  they  would  certainly  influence  the  circu- 
lation, and  then  produce  a  cui-rent  in  the  opposite  direction. 

However,  it  may  happen,  that  the  value  of  money  in  difTer- 
ent  countries  may  be  permanently  different,  when  there  are 
lasting  difficulties  in  the  way  of  the  leveling  influence  of  the 
incoming  or  outgoing  current  of  money.  Thus,  the  precious 
metals  mantain  a  high  value  in  those  countries  especially  which 
can  obtain  them  only  by  giving  commodities  difficult  of  trans- 
portation for  them.  If,  for  instance,  an  Englishman,  anxious 
to  take  advantage  of  the  high  value  of  money  in  Poland, 

^  Very  well  elaborated  by  Fullarton^  On  the  Regulation  of  Currencies,  71 
ff.,  139  ff.  Compare,  however,  ^ecana,  Economica  publica,  IV,  4,  27.  When 
England  on  the  occasion  of  the  removal  of  the  bank  restriction  in  182 1  and 
1S22,  caused  £9,520,759  and  £5,356,  7S8  to  be  stamped,  this  powerful  demand 
scarcely  affected  the  gold-agio  in  Paris.  (M.  Chevalier^  Cours,  III,  157.)  And, 
on  the  other  hand,  the  system  of  assignats,  developed  during  the  first 
French  Revolution,  on  so  large  a  scale,  had  no  influence  on  the  price  of  sil- 
ver in  the  rest  of  Eui-ope.  (Lord  King,  Thoughts  on  the  Bank  Restriction, 
1804.)  And  so,  Tooke,  History  of  Prices,  I,  205,  describes  a  very  large  in- 
crease of  the  medium  of  circulation,  after  which  the  prices  of  commodities 
remained  unchanged,  corn  fell,  colonial  products  rose  in  price,  both  as  they 
had  done  before,  and  from  causes  inherent  in  the  commodities  themselves. 
During  the  first  years  of  the  bank  restriction,  1799-1S01,  grain  rose  very  rap- 
idly in  price,  while  all  trans-Atlantic  products  sank.  (Tooke,  I,  332  if.)  The 
unusually  large  importation  of  wheat  from  January  i,  1846,  to  January  14, 
1S47,  was  paid  in  France  by  a  decrease  of  the  bank  metallic  reserve  (encaisse) 
to  the  extent  of  172,000,000  francs.  (M.  Chevalier,  Cours,  III,  470.)  An  ex- 
perienced practitioner  in  England  is  of  opinion  that  an  increase  of  bank  notes 
to  the  amount  of  about  £5,000,000  would  not  raise  prices  nor  increase  the 
tendency  to  speculation,  but  only  enlarge  the  deposits  of  the  bankers.  But, 
if  on  the  other  hand,  £5,000,000,  by  any  sudden  contingency,  were  to  be  put 
into  the  hands  of  the  working  classes,  this  money  would,  for  the  most  part, 
enter  immediately  into  circulation ;  the  price  of  commodities  would,  there- 
fore, rise  and  continue  to  rise  until  that  amount  had  come  into  closer  fists,  as 
it  would  after  some  time.     (Tooke,  III,  156  fl'.,  II,  323.) 


i 


Sec.  CXXV.]-  VALUE  IN  EXCHANGE.  377 

should  cause  Polish  articles,  such  as  wheat,  wood,  wool  etc., 
to  be  imported  into  England,  they  would  reach  their  destina- 
tion very  much  increased  in  price,  because  of  the  great  cost 
of  transportation.  Whether  Poland  or  England  would  have 
to  bear  this  cost  depends  on  the  relations  of  supply  and  de- 
mand. Certain  it  is,  however,  that  the  migration  of  money 
is  hereby  rendered  exceedingly  difficult,  forbidden  even  within 
the  hmits  of  certain  value-diflerences,  especially  where  the 
means  of  communication  are  universally  bad.  And  so,  the 
smaller  the  number  of  countries  which  minister  to  the  want  of 
commodities  of  precious-metal  districts,  the  more  must  other 
nations  obtain  the  money  they  need  only  at  second  and  third 
hand;  by  means  of  which,  naturally,  money  itself  is  made 
dearer  each  time.  Now,  it  is,  as  a  rule,  nations  in  a  low  stage 
of  civilization,  that  engage  in  the  exportation  of  raw  material, 
and  they  are  the  worst  adapted  to  engaging  directly  in  the 
carrying  on  of  trade.  When,  therefore,  they  do  not  possess 
gold  or  silver  mines  themselves,  money-value  is,  as  a  rule, 
highest  with  them ;  especially  as  the  absence  of  legal  security 
and  protection,  which  generally  obtains  there,  makes  the  value 
in  use  of  the  precious  metals  one  of  great  urgency  to  them.  ^  ^ 
Direct  legislative  or  governmental  provisions  may  operate 
in  the  same  direction;  as,  for  instance,  the  Japanese  embargo 
laws  which,  not  long  since,  limited  all  foreign  trade  to  two 

*  This  explains  the  high  price  of  gold  in  Farther  Asia,  which  was  formerly 
separated  from  America,  the  principal  source  of  supply  of  the  precious 
metals,  by  a  journey  around  the  earth,  the  then  usual  course  of  the  world's 
trade. 

The  precious  metals  are  generally  higher  in  country  places  than  in  large 
cities,  and  in  the  interior  than  on  the  sea-coast.  Since  the  public  highwaj's 
etc.  in  Germany  have  been  so  much  improved,  the  difference  in  the  value  of 
money  in  upper  and  lower  Germany  has  almost  disappeared.  (Raii^  in  the 
Archiv  der  polit.  Oek.,  Ill,  338.) 

5  Happy  begirning  of  this  doctrine  in  Huinc,  On  the  Balance  of  Trade. 
Further,  Thoinion,  The  Paper  Credit  of  Great  Britain,  ch.  11.  Adam  Smith, 
on  the  other  hand,  claims  that  gold  and  silver,  because  they  arc  costly  super- 
fluities are  uniformly  paid  most  dearly  for,  in  the  richest  countries.  (Wealth 
of  Nations,  I,  ch.  11,  3:  Digr.) 


378  CIRCULATION  OF  GOODS.  [B.  11,"  Cii.  III. 

foreign  nations.  "^  I  intend  to  treat  of  the  influence  of  taxation 
on  the  value  of  money,  in  a  future  work  to  be  written  by  me, 
on  the  Political  Economy  of  the  State. 


SECTION  CXXVI. 

UNIFORMITY  OF  THE  VALUE  IN  EXCHANGE  OF  THE 
PRECIOUS  METALS. 

[CONTIKtTKD.] 

Most  nations  can  satisfy  their  want  of  the  precious  metals, 
only  through  the  medium  of  foreign  trade.  Hence  they  very 
naturally  look  upon  the  cost  of  production  of  the  articles  of 
export  by  the  exchange  of  which  they  obtain  the  precious 
metals  either  directly  or  indirectly,  as  the  cost  of  production  of 
these  metals  themselves.  But,  the  rule  that  all  commodities  of 
equal  cost  of  production  have  equal  value  in  exchange  is  ap- 
plicable only  within  the  limits  of  the  same  economic  territory 
(§  107),  for  it  is  frequently  physically  impossible,  and  still  more 
frequently  rendered  difficult,  by  laws,  customs  and  states  of 
mind  to  transfer  factors  of  production  from  one  country  to 
another  simply  on  account  of  the  more  advantageous  market 
they  would  there  find.  Thus,  for  instance,  when  England 
exchanges  its  cotton  and  woolen  goods,  and  steel  instruments 
for  Mexican  silver,  the  cost  of  production  of  the  two  equiva- 
lents may  be  very  different,  and  the  one  party  in  this  trade 
may  permanentley  make  a  larger  profit  than  the  other.^  Ac- 
cording to  §  loi,  that  party  will  be  most  favored  in  whom  the 
desire  of  holding  to  his  own  commodities  is  farthest  from  be- 

■'  Similarly  in  China,  and  even  in  Upper  Egypt,  the  China,  so  to  speak,  of 
antiquity!  Compare  Herodot,  II,  112  flf;  Homer,  Od.,  IV,  354  ff.  The  relig- 
ion of  the  Egyptians  prescribed  to  them  a  mode  of  life  which  was  scarcely 
practicable  in  foreign  parts.  They  were  sj'stematically  inspired  with  a  horror 
for  everything  foreign.  They  had  a  strong  antipathy  for  salt,  fish  and  pilots. 
In  Egyptian  mythology,  Osiris  represents  the  Nile,  Typhon  the  desert  and 
the  sea!     (Plutarch,  De  Iside,  32.) 

'  The  other  party,  of  course,  makes  a  -profit  also.  He  is  in  a  better  condi- 
tion than  if  he  wished  to  produce  the  desired  commodity  in  his  own  counhy. 


Sec.  CXXVI.]  VALUE  IX  EXCHANGE.  370 

ing  out-weighed  by  his  desire  to  obtain  the  other.  But,  at 
bottom,  silver  is  no  very  indispensable  article.  Especiall}^  in 
highly  civilized  commercial  communities,  it  is  easiest  to  ob- 
tain substitutes  for  it,  while  the  principal  articles  of  English 
export  are,  for  the  the  most  part,  objects  with  which  to  satisfy 
wants  rather  urgent  in  their  nature,  very  general,  and  of  rapid 
growth;  and  which,  besides,  are  not,  to  any  extent,  diflicult 
of  transportation.  It  is  not  a  matter  of  surprise,  therefore, 
that  English  commodities,  in  silver  countries,  are  generally 
sold  above  the  mean  price  between  the  English  cost  of  pro- 
duction and  the  Mexican,  for  instance,  or  the  cost  of  procur- 
ing them  elsewhere ;  and  that  silver,  on  the  other  hand,  is  sold 
in  England,  under  the  same.  But  this  lowers  the  price  of  the 
precious  metals  of  the  latter  country  in  general.  Hence  a 
change  in  the  channels  of  international  trade,  which  in  most 
countries  is  the  only  source  of  gold  and  silver,  may  make  the 
price  of  the  precious  metals  dearer  in  one  place  and  cheaper  in 
another,  even  when  the  conditions  of  the  production  of  mines 
remain    entirely    unaltered.^      In    an    isolated   country,    any 

^The  first  clear  germ  of  this  doctrine,  which  is  one  of  the  inost  important 
theoretical  principles  of  international-trade  politics,  is  to  be  found  in  David 
Hume,  On  Interest ;  Cantillon,  Nature  du  Commerce,  226,  369  ff.  Bicardo,  Prin- 
ciples, ch.  7.  "  Gold  and  silver  having  been  chosen  for  the  general  medium 
of  circulation,  they  are,  by  the  competition  of  commerce,  distributed  in  such 
proportions  amongst  the  different  countries  of  the  world,  as  to  accommodate 
themselves  to  the  natural  traffic  which  would  take  place  if  no  such  metals 
existed,  and  the  trade  between  countries  were  purely  a  trade  of  barter." 
Rehenius,  OefF.  Credit,  I,  29  if.  Still  further  developed,  especially  by  John 
Stuart  Mill,  Elements,  1821,  III,  4,  13  f ;  Torrcns,  The  Budget,  1844.  J^^'"' 
Stuart  Mill,  Essays  on  some  unsettled  Principles  of  Political  Econom_y,  1844, 
No.  I,  and  Principles,  III,  ch.  19,  §  3,  5th  ed.:  "The  opening  of  a  new  branch 
of  export  trade  from  England ;  an  increase  in  the  foreign  demand  for  English 
products,  either  by  the  natural  course  of  events  or  by  the  abrogation  of  du- 
ties ;  a  check  to  the  demand  in  England  for  foreign  commodities,  by  the  lay- 
ing on  of  import  duties  in  England,  or  of  export  duties  elsewhere;  these  and 
all  other  events  of  similar  tendency,  should  make  the  imports  of  England, 
bullion  and  other  things  taken  together,  no  longer  an  equivalent  for  the  ex- 
ports ;  and  the  countries  which  take  her  exports  would  be  obliged  to  ofter 
their  commodities,  and  bullion  among  the  rest,  on  cheaper  terms,  in  order  to 


3S0  CIRCULATION  OF  GOODS.  [B.  II,  Ch.  III. 

amount  of  gold  and  silver  whatever  would,  finally,  as  soon  as 
the  people  had  grown  accustomed  to  it,  suffice  for  all  the 
wants  of  circulation.  But,  in  commerce  with  the  rest  of  the 
world,  the  greater  quantity  and  greater  cheapness  of  the 
precious  metals,  that  is  of  those  commodities  which  are  most 
current  and  are  possessed  of  the  greatest  amount  of  economic 
energy,  must,  without  fail,  be  of  the  greatest  advantage  to  a 
country;  and  this  irrespective  of  the  fact  that  they  are  under 
certain  circumstances  the  symptom  of  an  especially  highly 
developed  public  economy.  If  we  suppose  two  nations,  A  and 
B,  equal  in  every  other  point,  but  that  A  has  twice  as  much 
money  as  B,  and  that  prices  are  twice  as  high  there  as  in  B; 
yet,  with  the  same  effort  or  sacrifice,  A  could  levy  twice  as 
many  taxes  as  B.  In  case  of  a  war  between  them,  A  might 
pay  in  ready  money  for  the  necessities  of  an  army  which  had 
invaded  B,  with  one-fourth  the  sacrifice  which  B  would  have 
to  make  to  support  its  army  in  A,  if  we  reverse  the  case,  and 
suppose  that  B  had  invaded  A.^ 

re-establish  the  equation  of  demand;  and  thus  England  would  obtain  money 
cheaper,  and  would  acquire  a  generally  higher  range  of  prices." 

Obscurely  surmised  by  Beccaria^  E.  P.,  3,  18,  and  even  by  Galiant,  Delia 
Moneta,  II,  2.  Sem'or^s  admirable  work,  Three  Lectures  on  the  Cost  of  Ob- 
taining Money,  1830,  follows  up  the  thought  that  every  country  obtains  in- 
digenous and  foreign  products  at  a  cost  which  grows  smaller  in  the  same 
proportion  as  the  productiveness  of  its  people's  labor  is  large.  This  would, 
certainly,  explain  why  it  is  that  perhaps  one  hundred  English  days'  work  in 
cotton  manufactui-es  will  exchange  against  as  much  silver  as  is  produced  by 
two  hundred  days'  work  in  Mexican  mines  and  foundries.  This  would  not, 
by  any  means,  produce  a  lowering  of  the  price  of  the  precious  metals  rela- 
tively to  other  English  commodities,  but  the  mfluence  would  be  felt  equally 
by  all  the  products  of  English  national  industry. 

•'To  be  found  in  germ  in  Canii/lon,  Nature  du  Commerce,  1755,  249  ff. 
307.  Bilsch,  Geldumlauf,  14.  Kaufmann^  Untersuchungen,  I,  75  ff.  Many 
of  the  doctrines  of  the  so-called  Mercantile  System,  of  which  I  shall  treat  in 
my  projected  work  on  the  Political  Economy  of  Commerce,  have  given  ex- 
pression to  this  truth  in  an  inexact  and  exaggerated  way ;  but  they  were  not 
entirely  erroneous,  as  is  supposed  by  the  adherents  of  Hume  and  Smith. 
However,  J.  S.  Mill,  Principles  II,  ch,  19,  §  2,  does  not  fully  admit  the  de- 
gree of  the  cheapness  of  money  in   England  usually  assumed.     According 


Sec.  CXXVIL]  MEASURE  OF  PRICES.  381 

CHAPTER  IV. 

HISTORY    OF   PRICES. 


SECTION   CXXVIL 

MEASURE  OF  PRICES,  — CONSTANT  MEASURE. 

If  we  had  a  measure  of  prices  with  the  same  universality  of 
application  and  the  same  unchangeableness  as  the  measure  of 
length,  which  is  determined  by  astronomical  calculation,  we 
should  be  able,  not  only  to  clearly  understand  all  the  data  relat- 
ing to  value,  that  is  to  say,  a  not  unimportant  portion  of  histori- 
cal science,  but  we  should,  moreover,  have  a  practical  means  to 
condition  and  fix  even  perpetual  annuities,  in  such  a  way,  that 
they  would  always  afford  the  same  economic  and  purchasing 
power  to  the  person  receiving  them.  No  wonder,  therefore, 
that  political  economists  since  Petty's  time  have  zealously 
labored  to  find  a  constant  measure  of  prices.^  If  by  this  we 
understand  a  species  of  goods  such  that  it  should  always  main- 
tain equal  exchange-power,  as  compared  with  all  other  com- 

to  him  it  is  wants  of  luxury  (luxury-wants)  become  such  through  habit, 
that  produce  "  the  dearness  of  living  in  England." 

^  Petty  considers  the  search  for  a  nieasure  which  could  be  applied  both  to 
land  and  labor  as  one  of  the  principal  problems  of  Political  Economy.  (Po- 
litical Anatomy  of  Ireland,  62  ft")  Sir  J.  Stciiarf,  Principles,  III,  ch.  i, 
took  the  matter  very  easy  by  considering  the  so-called  "coin  of  account,"  for 
instance,  "bank-money,"  as  an  invariable  value-magnitude.  Compare  Jacob, 
Grundsiitze  der  National  CEkonomie,  II,  441  if.  Cazaux,  Economic  politique 
ct  pnvee,  1825,  16  ff.,  has  a  not  uninteresting  study  on  this  subject;  but  he 
goes,  throughout  his  argument,  on  the  assumption  that  the  rate  of  interest  is 
the  price  of  money!  If  the  rate  of  interest  in  two  countries  :=  I  and  i,  the 
prices  of  the  same  commodity  =:P  and  p,  the  true  thing- values,  V  and  v; 
then  we  have  v:  V::  i  p:  I  P! 


3S2  CIRCULATION  OF  GOODS.  [B.  II,  Cn.  IV. 

modities,  the  idea  of  a  "  constant  ■'  measure  of  prices  is  un- 
thinkable. We  would  have  to  suppose  here,  that  not  a  single 
kind  of  goods  varied  in  its  price;  since,  otherwise,  at  least  as 
compared  with  those  that  varied  in  price,  the  measure  of 
prices  would  itself  be  variable.^  But  we  may,  indeed,  search 
for  a  kind  of  goods  such  that  its  inherent  elements  and  the  ele- 
ments peculiar  to  it,  so  far  as  it  is  itself  concerned,  and  which 
go  to  determine  price,  should  exert  the  same  uniform  influence 
at  all  times.  If  there  be  such  a  kind  of  goods,  and  its  value 
in  exchange  as  compared  with  other  kinds  of  goods  were  to 
vary,  we  should  be  certain,  at  least,  that  the  cause  of  the 
change  was  not  in  it,  but  in  them;  that  it  had  not  grown 
dearer  or  cheaper,  but  that  they  had  grown  cheaper  or 
dearer.  Such  a  kind  of  goods  would  have  these  two  char- 
acteristics: x\.  A  given  amount  of  it  would,  under  all  cir- 
cumstances, have  the  same  value  in  use  for  the  same  num- 
ber of  persons.  B.  It  would  require,  under  all  circumstances, 
the  same  cost  to  produce  it,  and  therefore  the  supply  might 
always  keep  pace  exactly  with  the  number  of  those  who  de- 
manded it,^  In  this  way  the  supply  and  demand  of  this  kind 
of  goods,  abstraction  made  of  the  quantity  of  counter-values, 
would  preserve  forever  the  same  invariable  relation. 


SECTION  CXXVIII. 

VALUE  IN  EXCHANGE  ESTIMATED  IN  LABOR. 

Adam  Smith  is  of  opinion  that  different  kinds  of  goods,  no 
matter  how  far  removed  from  one  another  they  may  be  in 

'^  Lav.\  Trade  and  Money,  iSi.  Before  him,  and  quite  correctly,  Mon- 
tanari,  Delia  Moneta,  I,  p.  84  fF.,  compares  the  means  employed  of  measuring 
one  commodity  by  another,  to  the  means  used  to  estimate  time  in  terms  of 
space,  as  when  it  is  measured  by  the  revolutions  of  the  hands  of  a  clock,  and 
again,  space  in  terms  of  time. 

2  The  solvability  or  capacity  to  pay  of  buyers  cannot  be  taken  into  considera- 
tion here,  because  it  is  synonymous  with  the  amount  of  counter- values  which 
are  to  be  measured. 


Sec.  CXXVIIL]  VALUE  IN  EXCHANGE.  3S3 

time  or  space,  have  equal  value  in  exchange,  when  an  equal 
quantum  of  human  labor  may  be  purchased  by  their  means. 
He  adopts,  because  of  the  great  diflerences  in  work,  the  aver- 
age work  of  the  common  manual  laborer.  One  work-day,  and 
the  sacrifice  of  "  rest,  freedom  and  happiness  "  therewith  con- 
nected, are,  under  all  circumstances,  attended  with  the  same 
inconvenience  (value).  If  at  one  time  this  day's  labor  will  ex- 
change for  more,  and  at  another  for  less,  of  any  kind  of  goods, 
it  is  only  because  the  price  of  the  latter  has  fallen  or  risen.^ 

But  w^e  may  ask  whether  the  same  sacrifice  of  liberty  is  as 
great  a  hardship  to  a  Russian  as  to  a  Bedouin ;  or  whether 
the  sacrifice  of  an  equal  amount  of  rest  is  as  hard  for  the  New 
Englander  as  it  is  for  a  Turk,  or  as  difficult  to  endure  on  a 
hot  day  in  July  as  in  the  cold  of  winter.     Besides,  we  have 

^Adam  Smith,  Wealth  of  Nations,  I,  ch.  5.  Similarly  Luther,  vom  Kauf- 
handel :  Werke,  ed.  Walch,  X,  1098  f.  B.  Franklin  considered  the  labor  em- 
ployed  in  the  production  of  wheat  as  the  best  measure  of  prices.  (Letter  to 
Ld.  Karnes:  Works,  ed.  SfarJiS,  VIL)  As  Adam  Smith,  so  also  Sisinandi, 
Richesse  commerciale,  I,  371  f.;  Kraus,  Staatswirthschaft,  I,  84;  v.Schlozer, 
Anfangsgriinde,  i,  41.  Also  Malthus,  in  the  second  and  succeeding  edi- 
tions of  his  Principles,  ch.  I,  6,  and  Definitions,  ch.  S,  9.  The  Measure  of 
Vakve,  1S23.  Zacharia,  Vierzig  Biicher,  VII,  53  f.,  maintains  that,  at  least 
within  the  limits  of  every  separate  nation,  the  average  labor-power  of  one 
man  is  invariable.  Assuming  this  principle,  therefore,  to  be  true,  the  means 
of  subsistence  necessai-y  to  support  a  laborer  for  one  work-day  constitutes,  in- 
directly, a  measure  of  prices.  Toohe,  History  of  Prices,  I,  56,  says  that  the 
amount  of  a  day's  wages  is  always  a  better  measure  of  the  price  of  the  pre- 
cious metals  than  the  price  of  wheat.  Even  in  1750,  Galiani,  Delia  Moneta, 
II,  2,  had  denied  the  impossibility  of  an  entirely  invariable  measure  of  price 
in  this  Avorld  of  change,  but  he  considered  man  himself  the  least  variable  of 
measures,  and  in  a  country  where  slavery  prevailed,  slaves.  He  thought 
that  the  maada  of  the  negroes  were  a  part  of  the  average  price  of  slaves. 
Practically,  Adam  Smith's  proposed  measure  was  used  in  the  French  consti- 
tution of  1791,  in  as  much  as  it  provided  that  participation  in  primary  assem- 
blies should  depend  on  the  participant's  paying  an  annual  tax  equal  to  the 
wages  of  three  days'  work,  and  eligibility  as  an  klecteur,  on  the  possession  of 
an  income  equal  in  value  to  the  wages  paid  for  two  hundred  days'  day-labor. 
Oiven  endeavored  to  base  the  value  of  the  paper  money  in  circulation  in  his 
Utopian  commonwealth,  not  on  any  metal  of  a  certain  weight  or  stamp,  but  on 
hours  of  labor  as  the  unit.     (Reybatid,  Reformateurs  Contemporains,  I,  255.) 


3S4  CIRCULATION  OF  GOODS.  [B.  II,  Cii.  IV. 

here  to  do  primarily  only  with  value  in  exchange ;  and  that 
value  in  the  case  of  day-laborers'  work  is  subject  to  very 
great  fluctuations. 

The  elements  on  which  the  demand  and  supply  of  labor 
depend  are  not,  in  themselves,  invariable,  nor  do  their  varia- 
tions usually  compensate  for  one  another.  In  progressive  na- 
tions, the  value  in  use  of  day-laborers'  work  increases  as  well 
as  the  capacity  of  their  employers  to  pay  them;  but,  at  the 
same  time,  as  a  rule,  and  at  least  relatively  speaking,  the  sup- 
ply of  labor  diminishes  on  account  of  the  increase  in  the  cost, 
of  production  of  workmen.  Precisely  the  reverse  of  this  hap- 
pens in  nations  in  their  decline,  and  in  over-populated  nations. 
The  workman  is  subjected  to  the  necessity  of  accepting  dis- 
tress-prices for  his  work,  and  especially  of  accepting  them  for  a 
long  space  of  time.^  How  often  it  happens  that,  if  onl}'^  trans- 
itorily, when  wages  are  declining,  work  improves,  and  vice 
versa? 

Ricardo's  school  employs,  as  the  measure  of  the  price  of 
various  kinds  of  goods,  the  quantity  of  work  by  which  the 
goods  themselves  are  produced.*     It  is  evident  that  the  same 


^  The  wretched  condition,  until  within  a  short  time  since,  of  the  Irish  work- 
ing class,  is  well  known;  how  they  dwelt  in  mud  cabins  without  windows, 
board-floors  or  chimneys  etc.,  in  the  same  apartment  with  their  pigs ;  how 
they  lived  almost  exclusively  on  potatoes,  and  went  about  in  rags.  These 
same  Irish,  coelum,,  non  animtim  mutantcs,  received  in  North  America  for  the 
coarsest  kind  of  labor^  50  to  75  cents  wages,  besides  wheat  bread  and  meat 
three  times  a  day,  coflee  and  sugar  twice  a  day,  butter  once,  and  seven  or 
eight  glasses  of  whisky  or  brandy.  M.  Chevalier,  Lettres  sur  I'Amei-ique  du 
Nord,  I,  159.) 

^  Thus  in  Mauritius,  the  immigration  of  the  coolies  has  produced  a  decrease 
of  negro  wages,  but  an  increase  of  negro  industry.  In  the  Barbadoes,  the 
negroes  are  more  industrious  and  their  wages  lower  than  in  Jamaica.  The 
Avages  of  good  workmen,  as  for  instance  during  the  commercial  crisis  in  Man- 
chester, often  sink,  while  the  wages  of  bad  workmen  rise ;  as,  for  example, 
in  a  village  through  which  a  railroad  is  made  to  pass.  Compare  Lauderdale 
Inquiry,  ch.  i;  Sartorius,  Abhandlungen,  1806,  I,  16  ff. ;  Lotz,  Revision,  I, 
99  IT.;  M.  Chevalier,  Cours,  III,  88  f. 

*  Besides  the  passages  cited  in  §  T07,  compare  also  Harris,  On  Money  and 


Sec.  CXXIX.]  MEASURE  OF  PRICES.  385 

amount  of  common  labor  produces  very  different  results,  ac- 
cording as  it  is  well  or  badly  conducted.  Hence  Ricardo 
must  have  used  the  word  labor  in  the  sense  of  labor  ideally 
adapted  to  its  end.  But  in  this  way  it  would  be  impossible  to 
reduce  all  the  different  kinds  of  labor  to  a  common  denomi- 
nator.^ Nor  could  the  peculiar  effects  of  capitalization,  or  the 
influence  of  the  natural  or  artitlcial  limitations  of  competition 
be  estimated  in  terms  of  such  a  measure.  (See  §§  47,  107, 
189./ 

SECTION  CXXIX. 

THE  PRECIOUS   METALS   THE   BEST  MEASURE  OF  PRICES. 

It  is  no  more  possible  to  find  a  constant  measure  of  prices 
than  it  is  to  square  the  circle.  (  J.  B.  Say.)  If  the  two  mag- 
nitudes to  be  compared  are  separated  from  each  other  in 
space  but  not  in  time,  the  precious  metals  constitute  not  only 
the  best  measure  of  their  prices,  but  also  a  very  good  one. 
But  the  precious  metals  are  subject  to  very  sensible  and  acci- 
dental variations  in  price  in  long  periods  of  time.  If,  there- 
fore, we  would  compare  sums  of  money  belonging  to  different 
times  with  one  another,  we  must  first  construct  a  price-cur- 
rent list  of  all  the  more  important  articles  of  commerce  for  the 
time  in  question,  and  in  the  quantities  they  are  needed  in  every 

Coins,  II,  1757  f.;  Jacob  also  preceded  Ricardo.  See  the  German  translation 
of  Say,  II,  435,  507. 

5  The  introduction  of  the  words  "the  socially  necessary  time  of  labor" 
into  the  formulse  does  not  make  the  measure  any  more  practical  for  political 
economists  or  for  socialists. 

6  Cantillon,  who  reduces  all  the  cost  of  production  to  land  and  labor,  con- 
siders the  "  at  par  "  between  these  two  to  be  this :  that  the  labor  of  the  mean- 
est slave  corresponds  to  the  quantity  of  land  which  the  owner  is  obliged  to 
employ  for  his  support,  and  the  support  of  the  slave  and  of  the  children 
who  are  to  take  his  place.  (Nature  du  Commerce,  42.)  The  Physiocrates 
thought  that  the  internal  (innere)  value  of  two  commodities  stood  in  the 
same  relation  to  each  other  as  the  area  of  land  directly  or  indirectly  neces- 
sary to  their  production.    Schlettwein,  Grundfeste  der  Staaten,  1792,  230. 

Vol.  I.— 25 


3SG  CIRCULATION  OF  GOODS.  [B.  II,  Ch.  IV. 

day  life.  We  would  next  have  to  Ctilculate  the  average  of 
these  mean  prices,  and  thus  to  determine  the  relative  value  of 
the  amounts  to  be  estimated.^  The  person  who  should  limit 
his  comparison  to  a  few  species  of  commodities,  says  von 
Mangoldt,  would  lose  in  exactness  what  he  gained  in  com- 
prehensibility. 

In  every  such  list,  the  wages  of  a  day  would  occupy  a  very 
important  place.  The  desire  of  exerting  an  influence  over  the 
lives  and  actions  of  other  men,  and  the  desire  of  relatively 
greater  social  distinction  as  compared  with  the  social  distinc- 
tion of  others,  is  very  general ;  and  there  is  scarcely  any  better 
evidence  that  it  has  been  attained  than  the  possession  of  the 
power  of  controlling  a  large  number  of  days'  Vv^ork.  The  man 
who  can  keep  one  thousand  day  laborers  is  certainly,,  in  a  po- 

'  The  so-called  Sacli-Merth  (thing- value,  real-value)  of  Hermann,  St.  Unter- 
suchungen,  loi  ff.  Thus  Poidett  Scrofe  recommended  a  "  tabular  standard," 
to  be  officially  established  and  renewed  from  time  to  time,  to  serve  as  an 
anchor  to  those  persons  who  wished  permanently  to  fix  their  money  in  such  a 
manner  as  to  make  it  exchangeable  for  an  equal  value  in  things.  (Principles 
of  Political  Economy,  1833,  406.)  Something  of  this  kind  was  tried  for  50 
commodities,  between  1S33  and  1S37,  by  Porter,  Progress  of  the  Nation,  ist 
ed.,  II,  236  ff.,  then  for  40  commodities  by  Jevons  in  the  Statistical  Journal, 
1S65.  Of  course,  all  commodities  of  a  given  price  are  not  equally  important 
in  this  respect.  Thus,  for  instance,  a  fluctuation  in  the  price  of  diamonds 
would  have  no  effect  on  the  thing-value  or  real-value  of  a  day's  wages,  but 
it  certainly  would  on  the  thing-value  of  a  princely  income.  There  are  some 
excellent  re-marks  on  this  very  important  subject  in  Lorve's  work,  On  the 
Actual  Condition  of  England,  chs.  8  and  9.  The  controversy  carried  on 
between  Jevons,  A  serious  Fall  in  the  Value  of  Gold,  and  its  social  Effects, 
1863;  Statist.  Journal,  1865;  and  Laspeyres,  Htldebrand's  Jahrb.,  1S64,  81  ff. ; 
1S71,  I,  296  ff. ;  in  which  the  former  recommends  the  geometric  mean  of  the 
relative  prices  of  separate  commodities  at  different  points  of  time,  in  order 
to  calculate  the  average  relative  price;  and  the  latter,  as  usual,  the  arithme- 
tical mean,  is  very  thoroughly  reviewed  and  criticised  by  DroUsch,  who  shows 
that  neither  of  these  methods  is  sufficient,  but  that  the  quantity  of  every 
separate  commodity  must  also  be  taken  into  account,  for  which  he  furnishes 
practical  formulae.  (Math.  phys.  Berichte  der  K.  Siichs.  Gesellsch.,  1871, 
I,  143  ff.,  416  ff.)  It  is  certain  that  a  fixed  income  in  money  could  maintain 
its  real  value  or  thing-value  (Sachwcrth)  just  as  little  if  the  cwt.  of  bread 
rose  by  as  many  dollars  as  the  cwt.  of  pepper  had  fallen ;  as  if  the  increasing 
price  of  bread  depended  on  a  decreasing  price  of  pepper. 


Sec.  CXXIX.]  MEASL'RE  OF  PRICES.  387 

• 

litico-economical  sense,  an  important  personage.  Besides,  the 
height  of  day-wages  has  the  most  direct  influence  on  the  price 
of  many  other  commodities.^ 

No  less  important  is  the  price  of  wheat,  or  rather  of  the 
principal  article  of  food  of  the  people,  for  the  time  being,  with 
which  the  price  of  inland  raw  material  —  in  so  far  as  it  can  be 
produced  from  the  same  soil  alternately  with  wheat  —  and,  in 
the  long  run,  also  the  wages  of  labor,  are  so  essentially  con- 
nected.^ The  same  indispensable  necessity  of  wheat  which 
causes  its  price  to  fluctuate  so  largely  from  year  to  year,  and 
from  month  to  month,  promotes  the  uniformity  of  its  aver- 
age price,'*  when  many  years  are  taken  into  the  account.^  *^ 

^Senior,  Outlines,  1S7.  In  addition  to  this,  we  may  draw  from  the  thing- 
value  of  a  day's  wages  a  right  conclusion  as  to  the  economic  condition  of  the 
majority  of  the  people ;  and  assuming  the  customary  division  of  the  national 
wealth,  also  as  to  the  degree,  to  which  the  people  have  subjected  tlie  forces 
of  nature  to  their  service. 

^Jiicardo,  ch.  22,  refuted,  indeed,  only  the  view  that  an  increase  in  the 
Avages  of  labor  produced  by  the  higher  prices  of  corn,  would  necessarily 
make  all  goods  or  products  of  labor,  correspondingly  dearer. 

*  Compare  §  103.  In  Paris,  in  1S17,  the  sefier  of  wheat  cost  March  5,  55^ 
francs;  April  2,  57  fr.;  April  23,  60  fr.;  May  14,  63  fr. ;  May  21,  66  fr. ;  May 
28,  75  fr.;  June  4,  82  fr.;  June  11,  92  fr.     (Tooke,  History  of  Prices,  II,  17.) 

^  Locke,  98.  When  Condillac  asserts  that  wheat  is  the  best  measure  of 
prices,  he  adds,  when  free  ti-ade  in  wheat  obtains.  (Commerce  et  Gouverne- 
ment,  i,  23.)  PicJite,  on  the  other  hand,  while  advocating  the  despotic  guid- 
ance of  all  trade  by  the  state,  would  employ  wheat  as  the  fundamental  mea- 
sure of  prices.  (Geschl.  Handelstaat,  47  fF.)  That  grain  does  not  afford  a 
good  measure  of  prices  in  very  highly  cultivated  nations  nor  in  barbaric 
on«s,  see  Hermann,  II,  Aufl.,  451. 

•^  The  average  price  must  be  based  on  the  prices  of  a  great  many  years, 
since  crops  vary  not  only  from  year  to  3'ear  in  price,  but  from  decade  to 
decade.  See  Roschcr,  Nationalokonomik  des  Ackerbaues,  §  152,  and 
Roscher,  Kornhandel  und  Theuerungspolitik,  47  ff.  Great  wars  are  wont  to 
disturb  agriculture  in  such  a  manner  that  the  price  of  corn  is  very  much  in- 
creased by  them.  Hence,  it  is  not  unfrequently  possible  to  use  the  prices  of 
grain  as  a  species  of  barometer  to  determine  the  real  pressure  of  a  war  upon 
the  economic  life  of  a  people.  Judging  by  this  standard,  England  suffered 
much  less  from  the  War  of  the  Roses  in  the  fifteenth  centur}^,  than  from  the 
civil  wars  in  the  seventeenth ;  and  less  than  France  from  the  religious  wars 
of  the  sixteenth.     The  war  year  163^,  in  which  Gustavus  Adolphus  and  the 


388  CIRCULATION  OF  GOODS.  [B.  H,  Cir.  IV 

(Malthus.)  If,  by  reason  of  great  progress  made  in  the  art  of 
agriculture,  the  cost  of  the  production  of  wheat  should  fall  to 
one-half  of  what  it  was,  a  large  increase  of  population  would 
certainly  not  be  delayed  long.  And  so,  on  the  other  hand, 
there  would  be  a  decrease  of  population  if,  by  the  destruction 
of  artificial  means  of  irrigation,  or  other  steps  in  the  direction 
of  a  retrogressive  civilization,  the  cost  of  the  production  of 
wheat  were  to  be  permanently  increased. 

But  even  the  average  price  of  wheat,  during  a  long  series 
of  years,  is  not  entirely  invariable.  The  increasing  consump- 
tion compels  the  nation,  as  a  whole,  to  provide  for  its  require- 
ment of  wheat  from  less  fertile  sources,  w^hich  increases  its 
price  generally.  It  is  true  that  the  progress  of  the  science  of 
agriculture  and  of  the  corn-trade  counteract  this  tendency, 
retard  the  advance  of  the  price  of  wheat,  and  may,  for  a  time, 
produce  an  opposite  tendency.  It  is  true,  also,  that  the  people 
are  induced  by  their  most  general  and  vital  interests  to  take 
advantage  of  this  possibility.  But  spite  of  the  frequency  of 
exceptions  to  it,  the  rule  remains.''^  If,  therefore,  we  wished 
to  so  fix  a  perpetual  annuity  that  it  should  always  be  worth 

emperors  had  to  spare  the  country,  must  have  been  far  less  oppressive  for 
Saxony  than  the  later  Swedish  campaigns.  Roscker,  in  the  Tiibinger  Zeit- 
schrift,  1857,  471. 

'  Most  countries  go  through  these  successive  periods  in  their  corn  trade  • 
in  the  first,  exportation  preponderates ;  in  the  second,  there  is  an  equilibrium ; 
in  the  third,  importation  preponderates.  (M.  Chevalier,  III,  74  ff.)  Compare 
Tacit.,  Ann.,  XII,  43.  Omitting  the  two  dearest  and  the  two  cheapest  years, 
the  Prussian  provinces  were  circumstanced  as  follows : 

Price  of  Population 

Rye,  Per  Sq.  Mile, 

1816  to  i8jj.  ^8^7- 

The  Whole  Kingdom      -        -    40.  silver  groschens.  2,776 

Prussia          .        -        .        .        32.2     "            "  1)827 

Posen 34.3     "            "  2,i8o 

Brandeburg,  Pomerania         -         38.4     "             "  2,093 

Saxony 40.3     "            "  2,366 

Silesia 38.0    "            «'  3,612 

Westphalia       ....    ^^y.y     "            <;  3,600 

Rhine  Province    -        -        -        49.4    "            "  5)078 


I 


Sec.  CXXX.]  HISTORY  OF  PRICES.  389 

as  much  money  as  a  certain  quantity  of  wheat  had  cost,  on 
an  average,  during  the  three  preceding  decades,  the  thing- 
value  of  tliis  annuity  would,  on  the  whole,  rise  with  an  ad- 
vance in  civilization.^  To  obtain  something  that  would  re- 
main the  same,  it  would  be  necessary  to  combine  wheat  with 
at  least  one  chief  commodity,  the  intrinsic  basis  of  the  price  of 
which  had  a  development  independent  of  the  price  of  grain; 
but  the  whole  to  be  made  payable  in  money.  The  precious 
metals  are,  in  many  respects,  so  diametrically  opposed  in  prop- 
erties to  wheat,  in  their  dispensableness,  transportable  char- 
acter and  durability,  for  instance,  that  these  two  classes  of 
commodities  are  best  adapted  to  act  as  counter-balances  to 
each  other.' 

SECTION   CXXX. 

HISTORY  OF  THE  PRICES  OF  THE  CHIEF  WANTS  OF  LIFE. 

The  higher  civilization  advances,  the  dearer  all  those  com- 
modities in  the  production  of  which  the  factor  nature  with 

Rau,  Lehrbuch,  I,  §  1S3.  As  to  when  it  may  be  assumed  that  the  price 
of  corn  has  remained  unchanged,  see  Hermann,  loc.  cit.,  125  ff. 

2  Petty  recommended  the  average  daily  food  necessarily  required  by  one 
man  as  the  measure  of  price,  estimated  on  the  basis  of  the  cheapest  means 
of  subsistence.  (Polit.  Anatomy  of  Ireland,  62  ff.)  T/uiey  used  as  such  a 
measure  the  smallest  day's  wages;  as  he  supposed,  expressed  in  rye,  that  is, 
^  of  the  Prussian  scheffel.  Similarly,  Maltkus,  in  his  first  edition,  and 
Buquoy,  Theorie  der  Nationalwirthschaft,  240.  But  this  is  simply  to  substi- 
tute for  wheat  an  arbitrarily  determined  quantity  and  quality  of  the  same  as 
a  measure  of  prices.  For  practical  experiments  of  this  kind,  made  by  the 
depreciation  of  paper  money  during  the  French  Revolution,  see  M.  Chevalier, 
Cours,  III,  98;  and  Constitution  de  1795,  V,  68,  VI,  173.  Count  Soden,  Nat. 
CEk.,  II,  338  r,  demands  that  all  taxes,  salaries  of  state  officials  etc.,  should 
be  regulated  in  accordance  with  the  price  of  corn.  This  same  view  has  been 
suggested  recently  in  many  German  States. 

'  Recognized  generally  by  Locke,  Considerations  24.  Further,  Galliani, 
Delia  Moneta,  II,  2;  Adam  Smith,  I,  ch.  5.  Sclidffle,  N.  CEk.,  II,  Aufl.,  127, 
maintains  that  a  constant  measure  of  price,  such  as  would  enable  a  person 
to  stipulate  for  a  salary  for  instance  that  would  bo  ahvays  of  the  same  value, 
is  impossible.     Similarly,  Hildcbrand's  Jahrb.,  1871,  315  ff. 


390  CIRCULATION  OF  GOODS.  [B.  II,  Cii.  IV 

value  in  exchange  predominates  are  apt  to  become;  and  the 
cheaper,  on  the  other  hand,  all  those  in  which  labor  and  cap- 
ital play  the  principal  productive  part.^  This  is  accounted  for, 
not  only  by  the  almost  unlimited  capacity  of  labor  and  capital 
to  be  increased,  while  the  natural  forces  which  have  value  in 
exchange  are  susceptible  of  increase  to  so  small  an  extent; 
but  also,  and  especially,  because  new  additions  of  labor  and  cap- 
ital are  wont  to  cause  relatively  smaller  results  in  the  produc- 
tion of  raw  material,  and  relatively  larger  ones  in  industry  and 
commerce.     (§  33,  ff).'^ 

Hence,  from  the  relations  the  prices  of  the  different  classes 
of  commodities  bear  to  one  another,  we  ma}^  draw  important 
conclusions  as  to  the  degree  of  civilization  which  a  country  has 
attained.  The  above  law  also  affords  an  explanation  of  the 
fact,  that  a  young  nation,  which  has  made  no  great  strides  in 
the  way  of  development,  and  in  which,  of  course,  the  produc- 
tion of  raw  material  preponderates,  draw  their  commercial 
and  manufactured  necessaries,  by  way  of  preference,  from 

1  Compare  J.  Tucker,  Four  Tracts  on  political  and  commercial  Subjects, 
2S  ff.,  who  maintains  that  it  is  a  rule,  alniost  without  exception,  that  "oper- 
ose  or  complicated  manufactures  "  are  cheapest  in  rich  countries ;  "  raw  mate- 
rials," in  poor  ones.  Thus,  for  instance,  corn  (.''),  garden  products  in  the 
former;  cattle,  wool,  milk,  skins,  flesh-meat,  in  the  latter.  Ships  and  mov- 
able property  are  cheaper  in  the  former,  whereas  wood  may  be  said  to  be 
almost  the  free  product  of  nature  here.  See  especially  Adam  Smif/i,  Wealth 
of  Nations,  ch.  11,  Digr. 

^Senior,  Outlines  119  f.,  makes  the  following  calculation:  Of  the  15 d. 
which  a  loaf  of  bread  costs  in  England,  10  d.  goes  to  buy  the  wheat,  the  other 
5  d,  to  the  miller,  baker  etc.  If  now,  Ave  suppose,  that  in  consequence  of  an 
increased  demand,  and  therefore  of  increased  production  under  more  unfa- 
vorable circumstances,  the  price  of  wheat  should  rise  to  20  d.,  the  cost  of  pro- 
duction would  possibly,  because  of  an  improved  division  of  labor,  come  down 
to  3^4  d.,  and  hence  the  price  of  the  loaf  of  bread  would  be  increased  to  23^d. 
It  is  quite  the  reverse  in  the  case  of  lace,  because  here  a  piece  of  raw  ma- 
terial worth  only  2  shillings  may,  by  reason  of  the  labor  expended  on  it,  be- 
come worth  as  much  as  £105.  If  the  consumption  of  lace  should  increase 
so  that  the  value  of  the  raw  material  rose  to  4  shillings,  the  simultaneous 
decrease  of  the  cost  of  manufacture  to  the  extent  of  one-quarter  of  the  ag- 
gregate price,  would  leave  the  price  of  the  manufactured  article  £78,  19s. 


Sec.  CXXXI.]  HISTORY  OF  PRICES.  391 

precisely  the  most  highly  civilized  foreign  nations.  The  latter 
are  in  a  condition,  and  accustomed,  to  give  the  largest  quan- 
tity and  the  best  qualit}-  of  manufactured  articles  for  a  required 
quantit}'  of  raw  material ;  and,  of  course,  rice  versa.  Hence, 
in  this  intercourse  of  nations,  the  most  urgent  want,  and  the 
completest  and  easiest  possibility  of  satisf3'ing  it,  meet.''  Only 
very  highly  civilized  mother-countries  can  hold  fast  to  colo- 
nial possessions  in  our  day. 

SECTION  CXXXI. 

HISTORY  OF  THE  PRICES  OF  THE  CHIEF  WANTS  OF  LIFE. 

(CONTIKUED.) 

A.  In  the  case  of  a  great  many  raw  materials,  we  repeat- 
edly find  the  following  to  be  the  course  of  development.  In 
the  lower  stages  of  civilization,  they  grow  of  themselves,  and 
in  such  quantities  that  a  small  amount  of  labor,  and  that  only 
the  labor  of  occupation,  more  than  suffices  to  satisfy  the  small 
demand  for  them.  Here,  naturally  enough,  the  price  of  raw 
materials  is  very  low.  After  this,  it  rises  with  every  advance 
made  in  civilization,  for  two  reasons:  first,  because  the  de- 
mand becomes  greater  and  greater;  and  then,  because  the 
naturally  free  sources  of  production,  called  into  requisition  b}^ 
other  wants,  now  flow  less  and  less  abundantly.^  This  rise  in 
price  continues  until  the  point  is  reached  at  which  it  becomes 
customary,  instead  of  the  mere  occupation  of  the  free  gifts  of 
nature,  to  bring  forth  the  commodities  in  question  by  the  more 

8  When,  for  instance,  the  inhabitants  of  the  Baltic  coasts,  by  way  of  pref- 
erence, kept  up  their  relations  with  the  Hanseatic  cities,  the  Dutch  and  En- 
glish, that  is  with  the  most  important  industrial  and  commercial  nations  in 
their  own  sphere,  they  in  all  this  pursued  only  their  own  interest.  As  to 
how  this  intercourse  between  "  old  "  and  "  new  "  countries  is  susceptible  of 
the  very  highest  development,  sec  Torrens,  The  Budget:  On  Commercial 
and  Colonial  Policy,  1S44,  and  earlier,  Wahefield^  England  and  Amciuca,  II, 
1S23. 

1  The  clearing  up  of  primeval  forests,  the  cultivation  of  natural  meadows, 
etc. 


392  CIRCULATION  OF  GOODS.  [B.  II,  Ch.  IV- 

laborious  process  of  production  proper.  From  this  time  for- 
ward, the  usual  seeking  of  prices  for  a  level  requires  that  our 
commodity  should,  like  all  others  which  suppose  an  equal  sac-, 
rifice  of  the  means  of  production,  claim  an  equal  value  in  ex- 
change. If  from  any  peculiar  causes,  the  production  of  this 
commodity  is  not  at  all  possible,  or  if  it  is  capable  of  no  great 
extension,  its  price,  which  would  under  the  circumstances,  be 
limited  only  by  the  purchasing  power  of  the  buyer,  might 
attain  the  utmost  extreme  reached  in  prices  under  the  spur  of 
vanity  or  of  the  mere  love  of  the  commodity  itself.  The 
latter  is  true  especially  in  the  case  of  venison ;  ^  the  former, 
in  the  case  of  the  tame  cattle,^  fresh-water  fish,*  and  wood.  ^  ^ 

^  In  Hungary,  during  the  sixteenth  century,  the  choicest  venison  was  con- 
sumed by  plebeians  and  nobles  alike.  Herberstein^  Rer.  Moscov.  Comm.,  97. 
In  Russia,  even  the  lowest  classes  not  unfrequently  partake  of  roast  hare  and 
duck  etc.  KoM^  Reise  in  Russland,  II,  3S6.  Still,  in  St.  Petersburg,  wild- 
fowl game  rose  between  the  time  of  Peter  the  Great  and  Alexander  I.  600 
per  cent,  in  price.  (StorcJi,  Handbuch,  I,  36S.)  In  Pittsburg,  in  1807,  mutton, 
beef  and  veal  cost  from  4  to  6  cents  a  pound,  and  game  only  from  3  to  4  J^ 
cents  a  pound.  (Melish,  Travels  through  the  United  States,  II,  57.)  The 
more  the  game  laws  are  enforced,  the  longer  does  the  low  price  of  game  con- 
tinue, especially  when  it  is  not  easy  for  the  poor  to  procure  them.  The  moderns 
have  seldom  thought  of  raising  game  artificially ;  among  the  Romans,  arti- 
ficial raising  was  confined  to  the  hare  and  fieldfare.  (Varro,  R.  R.,  Ill,  12 
ff.;  Columella,  R.  R.,  VIII,  10.)  Hence,  the  enormous  prices  paid  for  game, 
of  which  Pliny,  H.  N.  X.,  43,  relates  an  example  from  the  time  of  the 
emperors.  On  the  other  hand,  Polybius  assures  us  that,  in  his  time,  game 
was  to  be  had  as  good  as  gratis  in  Lusitania.     XXXIV,  8,  7. 

2  In  Buenos  Ayres,  in  the  nineteenth  century,  beggars  on  horseback  were 
to  be  seen.  (Robertson,  Letters  on  South  America,  II,  294.)  In  Krasno- 
jarsk,  in  1770,  i^  rubles  was  the  price  of  an  ox,  1  ruble  of  a  cow,  from  2  to  3 
of  a  horse,  from  0.3  to  0.5  of  a  sheep;  0.15  of  a  deer.  (Pallas,  Sibirische 
Reise,  III,  5,  II  12.)  According  to  the  Tables  of  Prices  in  Sir  F.  M.  Eden, 
State  of  the  Poor,  Append,  i,  and  Rogers,  History  of  Agriculture  and  Prices 
(1866),  I,  245,  361,  the  following  prices  obtained  in  England;  in, 

(On  an  average.) 
1125-26,      one  ox,  I  shilling.        One  quarter  of  wheat,  20      shillings, 
1260-1400,      "      "  13         "       i;4fd.  "  "  5  "      io|^d. 

1406  "      "     g%     "  "  "  ^Yz         "      • 

1463  •'     "  10-20    "  "  "  17^-4%  " 

Compare  Hume,  History  of  England,  a.  1327.     Under  Henry  VIII.  veal, 


I 


Sec.  CXXXII.]  HISTORY  OF  PRICES.  39J 


SECTION  CXXXII. 

HISTORY  OF  THE  PRICES  OF  THE  CHIEF    WANTS  OF  LIFE. 

[CONTIUrED.] 

B.  The  rise  in  prices  is  observed  earliest  in  that  class  of 
goods  in  question  which  by  reason  of  their  small  volume  and 

beef,  mutton  and  pork  were  food  for  the  poor  in  England,  and  cost  on  an  av- 
erage i^d  per  pound;  while  wheat  cost  from  7  to  8  shillings  a  quarter.  (24 
Henry  VII,  c.  3.  Price,  Observations,  II,  148  f.)  The  same  appears  from 
the  "  reasonable  prices  "  which  Charles  I,  in  1663,  had  established  by  sworn 
juries  viz.:  that  the  different  kinds  of  meat  were  much  cheaper  compara- 
tively than  corn  in  our  days.  (Ryincr,  Foedera,  XIX,  511.  Anderson,  Ori- 
gin of  Commerce,  a.  1633.)  In  many  places  in  the  highlands  of  Scotland,  in 
the  middle  of  the  seventeenth  century,  one  pound  of  oat-bread  cost  as  much 
or  more  than  one  pound  of  the  best  meat.  The  union  of  Scotland  with 
more  highly  civilized  England  soon  changed  the  relation,  so  that  in  Adam 
SmitJi's  time,  good  meat,  in  nearly  all  parts  of  Great  Britain  was  worth  from 
2  to  4  times  as  much  as  the  same  weight  of  wheat  bread.  (Wealth  of  Na- 
tions, I,  ch.  II,  I.)  The  Thomas  Hospital  in  London  paid,  on  an  average, 
for  good  beef  per  stone  weight : 

1701-1710,             ------  IS.  7.9d. 

1764-1773, IS.  3.7d. 

1794-1S03,            -            -            -            -            -            -  IS.  5.d. 

1S04-1S21,  --..---  IS  lo.gd. 

1S22-1S42,            ------  IS.  i.5d. 

(Porter,  Progress  of  the  Nation,  III,  112.)  Among  the  most  certain  proofs 
of  the  high  degree  of  economic  civilization  attained  in  upper  Italy  about 
the  close  of  the  medieval  times  is  the  fact,  that  the  price  of  cattle,  compared 
with  that  of  wheat  in  the  thirteenth  and  fourteenth  centuries,  varies  very 
little  from  what  it  is  to-day.  (Cibrario,  Economia  politica  del  medio  Evo,  III, 
335-3S3.)  Compare  Rau,  Lehrbuch  I,  §  1S5.  In  Athens,  the  cost  of  a  7ne- 
diinnos  of  wheat  was  as  great  as  that  of  a  sheep  in  Solon's  time.  In  the  age 
of  Demosthenes,  it  cost  only  half  as  much.  (Bockh,  Staatshaushalt  der 
Athener,  I,  107,  132.)  It  is  obvious,  however,  that  the  price  of  meat  com- 
pared with  that  of  corn,  was  lowered  by  the  great  extension  of  the  artificial 
cultivation  of  meadows;  for,  when  the  former  has  reached  its  maximum,  it 
becomes  a  great  spur  to  the  promotion  of  the  latter.  Thus,  in  England,  the 
price  of  meat,  at  the  beginning  of  the  sixteenth  century,  was  on  an  average, 
higher  than  in  Adam  SmiWs  time.  (loc.  cit.)  To  the  same  cause  is  to  be 
ascribed  the  state  of  things  in  Prussia  mentioned  by  v.  Podeivtls,  Wirth 
schaftserfahrungen,  II,  15. 


394:  CIRCULATION  OF  GOODS.  [B.  11,  Ch.  IV 

their  comparatively  great  value,  and  by  reason  of  the  greater 
capacity  to  be  kept  in  a  state  of  preservation  for  a  longer 
time,  are  best  adapted  to  seeking  a  more  favorable  market. 
This  applies  particularly  to  the  skins,  fleece,  hair,  feathers, 

As  a  common  basis  for  such  calculations,  the  following  may  be  accepted. 
It  is  plain  that  meadows,  pasturages  and  forage-fields  must  yield  as  much  in 
meat,  as  corn-fields  of  the  same  dimensions  of  equal  goodness,  and  situated 
as  favorably,  in  corn.  According  to  Block,  a  Prussian  acre  (Morgen)  of  the 
best  quality,  used  as  a  meadow,  produces  a  hay-value  equal  to  i,ooo  pounds, 
a  clover-value  equal  to  2,420;  as  a  vegetable  field,  a  beet  or  potato-value  equal 
to  6,050-6,930  pounds.  V.  Lengerke's  Q.h^\vi\'3X&  is  that  no  pounds  of  cattle- 
fodder  expressed  in  terms  of  iiay,  produces  on  an  average  40  pounds  of  milk, 
and  from  3_J^  to  4  pounds  of  meat.  This  would,  at  most,  give  36,  SS  and  220- 
252  pounds  of  meat.  The  yield  of  -wheat,  v.  Lengerhe  estimates,  on  the  best 
soil,  and  on  an  average,  at  14  Prussian  scheffels  (at  80  pounds,  i.  e.  1,120 
pounds)  yearly  per  acre  (Motgen).  The  three  periods  in  the  history  of  the 
prices  of  cattle  were  clearly  recognized  by  Thaer,  Landw.  Gewerblehre,  1S15, 
100. 

^  It  is  a  very  characteristic  fact,  in  relation  to  the  river  fisheries,  that  the 
fable  that  servants  formerly  stijDulated  not  to  eat  salmon  except  twice  a  week 
is  to  be  found  in  so  many  places.  Thus  on  the  Elbe  and  the  Rhine.  Com- 
pare Thaarup,  Danische  Statistik,  I,  112.  In  Scotland,  about  the  end  of  the 
seventeenth  century,  the  story  in  places  ran,  that  it  was  five  times  a  week. 
(Walter  Scott,  Old  Mortality,  ch.  8.)  In  England,  fish  seems  to  have  been  a 
tid-bit  among  the  poorer  classes  in  the  fourteenth  century.  (Rogers,  I,  606.) 
It  was  dearer  especially  during  Lent.  (Statist.  Journ.,  1S61,  544  ff".)  The 
artificial  production  of  sea-fish  seems  to  have  been  tried  only  by  the  ancient 
Romans.  On  the  whole,  Adam  Smithes  law  that  a  ten-fold  demand  can,  as  a 
rule,  be  met  only  by  a  greater  than  ten-fold  labor,  applies  here.  (I,  370,  ed. 
Basil.)  But  this  relation  is  obscured  to  a  certain  extent,  from  the  fact  that  the 
source  of  the  production  of  sea-fish,  the  ocean,  which  may  be  claimed  at  any 
time  by  occupation,  is,  practically,  boundless.  Here,  therefore,  the  improve- 
ments made  in  nautical  science,  and  the  progress  of  geographical  knowledge, 
may  yet  for  a  long  time  compensate  for  the  exhaustion  of  the  nearer  seas, 
and  even  more  than  counterbalance  it. 

^  Among  a  great  many  nations  in  a  low  stage  of  civilization,  agriculture 
consists  in  the  burning  down  of  the  forest.  In  1594,  the  Lauenforder  forest 
produced  1,110  thalers'  worth  of  food  for  hogs,  and  wood  to  the  amount  of 
44  thalers.  (v.  Berg,  Staatsforstwirthsch.,  213.)  The  Harzgerode  woods,  at 
the  ducal  line  of  Anhalt-Bernburg,  were  estimated  at  6,000  thalers.  A  hun- 
dred years  later,  they  brought  in  yearly  70,000  thalers,  although,  in  the  mean- 
time, very  little  progress  was  made  in  the  science  of  cultivating  them,  (v 
Justly  Staatswirthschaft,  II,  211.)     We  may  form  a  notion  of  the  relativity  of 


Sec.  CXXXII.]  HISTORY  OF  PRICES.  395 

teeth,  horns,  etc.,  of  animals,  in  which,  in  the  breeding  of  stock, 
etc.  people  in  a  low  stage  of  civilization  are  much  more  apt 
to  speculate  than  in  their  meat.  Here  it  is  considered,  and 
rightly  so,  to  be  much  more  profitable  to  raise  many  animals 
which  are  badly  cared  for,  than  a  few,  that  are  well  cared  for ; 
for  the  care  bestowed  on  animals  has,  as  a  rule,  much  more  in- 
fluence on  the  body  itself  than  on  their  covering.^     In  fisheries, 

the  idea  of  the  clearness  of  wood  from  the  fact  that  in  Bavaria,  for  instance, 
in  1S40,  there  was  a  great  deal  of  complaint,  that  in  the  disti-ict  of  Isark  the 
price  rose  from  6  to  9  florins ;  in  the  districts  of  Regen  and  the  lower  Maine, 
from  II  to  14  florins  to  from  15  to  18;  in  the  Rhine  district,  from  20  to  26 
florins  per  cord  (Klafter).  (Rau,  Lehrbuch,  III,  §  150,  a.)  Besides,  the 
price  of  wood  in  the  forest  rises,  Avith  an  advance  in  civilization,  much  more 
rapidly  than  it  does  in  the  market;  in  which  last,  labor  and  capital  play  a 
greater  part.     fTiA?/,  I,§  3S5.) 

^  Plan  for  the  artificial  pi-oduction  of  pearl  oysters.  (Novara-Rcise,  I,  303.) 
Ostriches  seem  now  to  be  ceasing  to  be  objects  of  mere  occupation,  and  to 
be  becoming  objects  of  breeding.     (Ausland,  1S69,  §  13.) 

'  Thus  Wolff's  experiments  made  at  Mockern  have  shown  that  in  the  case 
of  sheep  fed  with  hay,  the  wool  becomes  much  heavier  and  the  flesh 
leaner  than  those  of  sheep  fed  with  a  more  concentrated  food.  While  it  is 
estimated  in  England,  at  the  present  time,  that  the  wool  of  South-Down 
sheep  is  worth  scarcely  one-tenth  what  their  flesh  is  (yacob,  On  Corn 
Trade,  166),  mutton,  from  the  year  1260  to  1400,  was,  on  an  average,  worth 
17  pence;  and  this  even  at  a  time  when  prices  were  gradually  rising;  but  the 
wool  of  one  animal  (i  lb.,  ']'^  ounces),  5J4f  pence.  (Rogers,  I,  362,  395.) 
Even  under  Anglo-Saxon  kings  the  fleece  was  worth  40  per  cent,  of  the  val- 
ue of  the  whole  sheep.  (David  Hume.)  And  so  W.  Macann,  Two  Thou- 
sand Miles  Ride  through  the  Argentine  Provinces,  1S53,  I,  151,  says  that  in 
the  interior  of  Buenos  Ayres,  he  purchased  S,ooo  sheep  at  iS  pence  a  dozen, 
and  after  a  march  of  200  English  miles,  sold  the  skins  for  sixty  pence  a  dozen. 
In  Goya,  formerly,  a  live  horse  cost  3  pence,  its  skin  on  the  coast  i3 
pence ;  and  the  slaughtering  of  the  beast  cost  3  pence,  the  removal  and  clean- 
ing of  the  skin  3  pence ;  and  3  pence  were  paid  for  transportation.  (Robert- 
son.) 

In  Ireland,  in  1763,  it  not  unfrequently  happened  that  the  skin  and  tallow 
of  an  ox  cost  as  much  in  a  commercial  city  as  the  whole  ox  had  cost  in  the 
nearest  market  town.  (Temple.,  Works  III,  13.)  In  England,  from  1260  to 
1400,  the  average  price  of  a  whole  cow  was  9s.  9d.;  of  the  hide  is.  8d.,  and 
cows  were  cheapest  in  the  first  decade,  i.  e.,  6s.  2d.,  and  the  hides  dearer  than 
they  were  generally  afterwards,  i.  e.,  by  from  i-g^d.  (Rogers.,  I,  361,  451.) 
In  Saxony,  according  to  Engcl  (1853),  the  average  price  of  homed  cattle  was 


396  CIRCULATION  OF  GOODS.  [B.  II,  Ch.  IV. 

caviar,  sturgeon- bladders,  oil  and  whalebone;^  and  in  forest- 
about  46  thalers;  of  their  hide,  4  thalers  and  21  silver groschens.  Russia  ex- 
ported, 1S42-1847,  72,636,166  silver  rubles  worth  of  tallow,  1,832,137  silver 
rubles  worth  of  horse  hair,  10,811,735  worth  of  bristles  (Borsten),  7,387,140 
of  uncured  skins,  36,159,452  of  sheep's  wool,  but  flesh-meat  only  to  the 
amount  of  370,363  rubles,  and  entire  animals  to  the  value  of  6,853,241  rubles. 
(P.  Slorch,  Der  Bauernstand  Russlands,  289  ft'.)  Tallow  is  there  ten  times 
dearer  than  the  same  volume  of  wheat.  (Steinkaus,  Russlands  industrielle 
und  commercielle  Verhaltnisse,  294  ff.);  while  in  Saxony,  according  to  Engel 
(1821),  a  pound  of  wheat  cost  on  an  average  7.  ^pfennigs,  and  a  pound  of 
tallow  30  f.  However,  Russia's  recent  progress  in  civilization  has  had  for 
effect:  that  the  exportation  of  tallow  (1833  =  4>^  million  fiids;  1S69  =  2% 
mill.)  has  greatly  fallen  oft' ;  while  that  of  butter  and  live  stock  has  increased. 
(v.  Lengefeld^  R.  im  19.  Jahrh.,  220  ft". 

In  England,  during  the  fourteenth  century,  a  pound  of  meat  cost,  on  an 
average,  34fd. ;  of  lard,  from  ij^  to  2.  (Rogcrs^l,  411.)  On  the  other  hand, 
from  1848  to  1856,  the  average  January  price  of  beef  from  America  was 
no  shillings;  of  tallow  from  St.  Petersburg,  48s.  iid.  per  cwt.  (Nevjtnarcli.) 
And  so,  in  the  time  of  Pallas^  the  Cossacks  chased  the  deer  of  their  steppes 
only  for  the  sake  of  its  skin  and  horns.  (Pallas,  Reise,  III,  524.)  While 
the  Greeks  got  horn  from  Macedonia  and  Thrace  (Herodot.^  VII,  156),  it  is 
a  striking  proof  of  high  civilization  that  at  Athens  (.?),  about  the  time  of  the 
hundredth  Olympiad,  an  ox-hide  was  worth  only  3  drachmas,  and  the  whole 
ox  77  drachmas.     (Bockh,  Staatshaushalt,  I,  105  ft") 

As  the  ox  is  primarily  serviceable  as  an  object  of  food  and  an  instrument 
of  labor,  and  the  sheep  on  the  other  hand,  only  an  instrument  to  produce 
wool,  it  is  easy  to  understand  why,  with  the  further  advance  of  civilization, 
the  price  of  oxen  rises  comparatively  much  more  than  the  price  of  sheep.  In 
Athens,  during  the  time  of  Solon,  an  ox  was  equal  in  value  to  five  sheep. 
(PlutarcJi,  Solon,  23.)  So  also  in  countries  with  a  low  civilization  in  the 
time  of  Polybius.  (Polyb.,  XXXIV,  8;  Gell.,  XI,  i.)  Why  the  same  was 
the  case  in  Rome  at  the  beginning  of  the  Republic.^  (Plut.,  Popl.,  11).  In 
England  the  proportion  between  the  price  of  an  ox  and  that  of  a  sheep  was,  in : 

Tear    As  Year    As 

927     6:1    (Henry.)         1229     8:1     (Eden.) 
1125     3:1  126-1492  (av.) 9.2: 1  ('i?<7^.^ 

1182     6.3:1  1497     10:1 

I197    9:1  1500     11.6:1 

1511     8:1 

At  present  the  proportion  may  be  from  10  to  20:  i.  In  Saxony,  it  is  as 
48  thalers  to  5.27.     (Engel.) 

"  About  1793,  Russia  exported  10,000  rubles  worth  of  fish,  452,000  of  stur- 
geon bladders,  188,000  of  caviar.     (Siorch,  Russland,  II,  1S4.)     But  this  had 


Tear 

As 

1528 

10:  I 

I.S29 

12.8: 1 

1531 

9.4:1 

1551 

10.6:  I 

1597 

8.2 :  I  (Eden.) 

Sec.  CXXXII.]  HISTORY  OF  PRICES.  397 

culture,  pitch,  tar,  potash  and,  to  some  extent,  building  mater- 
ial etc.,  play  the  same  part.'^ 

Conversely,  the  price  of  those  portions  which  are  most  dif- 
ficult of  transportation,  by  reason  of  their  volume  or  of  the 
difficulty  of  preserving  them,  rises  latest.  To  this  category 
belongs  milk,  the  production  of  which  in  a  fresh  state  can  be 
made  an  object  of  economic  speculation,  only  where  civiliza- 
tion is  at  its  very  highest,  and  especially  in  the  vicinity  of 
large  cities.*  It  is  indeed  possible  by  its  transformation  into 
butter  or  cheese  to  preserve  milk  and  make  it  capable  of 

undergone  a  great  change  even  in  1S50.  x\t  present,  there  are  64  per 
cent,  of  sturgeon  bladders,  27  of  caviar,  and  7  of  whole  fish.  (Steinfiaus, 
Russland's  industrielle  und  commercielle  Verliiiltnisse,  102,  36S.)  Yet  the 
Astrakan  fishermen  still  throw  the  greater  number  of  the  sturgeon  they  catch 
back  into  the  water.  (Pallas,  Reise  im  sUd.  Russland,  i,  1S9;  Stcinhaus,  99.) 
Salt  fish  are  adapted  for  transportation  to  a  distance  not  only  because  they 
can  be  preserved,  but  also  because  they  may  be  caught  and  prepared  on  the 
great  highway  of  the  water.  Athens  got  from  the  Black  Sea  besides  wood, 
tar,  wool,  hides,  cordage,  honey,  wax  and  slaves,  also  salt  fish.  (Wolf,  z. 
Demosth.  Leptin.,  252;  Bockh,  Staatshaush.  I,  51.)  The  latter  from  Sardinia, 
Egypt  and  Spain.    (Pollux,  VI,  48.) 

*  The  principal  countries  that  produce  potash  are  Russia  and  North  Amer- 
ica. It  is  estimated  that  a  cwt.  of  potash  requires,  on  an  average,  480  cwt. 
of  wood.  (Pfeil,  Grundsatze  der  Forstwirthsch.  in  Bezug.  auf  National- 
Oekon.  etc.,  I,  128.)  From  iSoo  to  1S40,  wood  for  fuel  in  Wiirtemberg  trebled 
its  price;  for  building  material  the  price  increased  1.6  times.  (Deutsche 
Vierteljahrsschrift,  1847,  No.  4,  104.) 

*  Whereas  barbarous  nations  take  little  trouble  to  turn  the  milk  from  their 
cows  to  account  (Roscher,  Ideen  z.  Politik  und  Statistik  der  Ackerbausys- 
teme,  Archiv.  der  politische  CEkonomie,  neue  Folge,  III,  202),  Rcuning,  in 
1844,  calculated  that  the  milk  from  all  the  cows  in  Saxony  amounts  to  a  value 
of  10,000,000  thalers,  their  meat  to  over  2,000,000,  and  the  labor  performed 
by  them  in  various  ways  to  3,000,000.  In  Silesia,  in  the  last  decade  of  the 
eighteenth  century,  a  quart  of  milk  was  estimated  to  be  worth  2  pfennigs 
(Festschrift  der  deutschen  Landwirthschaftsversammlung,  1869,  343),  where- 
as now  it  is  sold  almost  every  where  for  \2  ffennigs.  (Schmoller.)  In  the 
rather  high  state  of  civilization  which  Saxony  had  reached  at  the  end  of  the 
sixteenth  century,  when  game  was  already  dear,  and  the  prices  of  other  meat 
were  almost  as  high  as  in  1800,  a  shcffel  of  rye  was  worth  44  measures  (Mass.) 
of  milk,  and  recently  82^  measures.  (Schmoller,  Tiibinger  Ztschr.,  1871. 
336  ff.) 


398  CIRCULATION  OF  GOODS.  [B.  II,  Cii.  IV. 

transportation.  But  to  carry  on  such  a  business  for  the  pur- 
poses of  trade,  a  care  and  a  cleanliness  are  needed  which  are 
national  characteristics  only  of  a  highly  civilized  people  (§  229) 
and  the  preparation  of  a  superior  quality  of  cheese,  which  is  al- 
w^ays  a  very  long  process,  is  conditioned  by  the  employment 
of  capital  long  in  advance  of  a  return,  and  which  no  poor 
nation  is  in  a  condition  to  make.^  Cows  are  primarily  milk- 
producing  animals.^  Hence  their  price,  as  a  rule,  rises  later 
than  that  of  oxen,  but,  in  the  higher  stages  of  civilization,  it 
rises  much  more  surprisingly.  Something  analogous  is  true 
of  those  products  which  result  from  what  remains  after  the 
production  of  other  goods  or  commodities.  As  long  as  this 
alone  supplies  the  demand,  the  cost  of  production  of  the 
former  commodity  is  almost  nothing,  and  hence  its  price  is 
very  low.  For  this  reason  hogs  are  relatively  cheap  in  two 
very  different  periods  of  a  people's  national  economy,  in  a  very 
low  stage  of  civilization  where  forests  are  plentiful  and  they 
are  fattened  on  acorns  and  the  nuts  of  the  beech,  and  also 
when  they  may  be  considered  as  a  collateral  product  of  some 
great  industry,  such  as  distilleries  and  dairy-farming;  and 
w^hen  raised  by  a  numerous,  especially  a  rural  population  of 
small  means  and  laborers,  in  order  to  turn  to  advantage,  in 
the  former  instance,  the  remains  of  production,  and  in  the  lat- 
ter of  consumption.''     Where  neither  of  these  two  reasons  ob- 

'■  The  principal  cheese-producing  countries  and  cities  are  Holland,  Lim- 
burg,  Switzerland,  Gloucester,  Chester,  Ayrshire  etc.  Compare  HoscAer,  loc. 
cit.,  195  if. 

^In  England,  in  the  year  looo,  a  cow  was  worth  only  as  much  as  two 
sheep.  (Afiderson,  Origin  of  Commerce,  a.,  979.)  The  best  butter  was  worth 
only  id.  per  pound  in  1550,  while  pork  was  worth  1%,  veal  and  mutton,  i_J^, 
and  beet;  2  J^^d.  The  price  of  butter  was  exceedingly  variable  in  the  sixteenth 
century.     (Eden.) 

'  During  the  middle  ages,  pork  constituted  the  most  usual  animal  food  even 
of  the  best  classes.  ('^«.sc//2'«_^,  Ritterzeit  und  Ritterwesen,  I,  164.)  Immense 
importance  attached  to  pork  by  the  Lex  Salica.  (Tit.,  II,  XIV;  Emendatt. 
Caroli  Magni,  II,  i  ft'.)  The  archbishop  of  Cologne  used  every  day  24  large 
and  8  medium-sized  hogs,  and  four  more  on  the  three  great  festivals.  The 
abbot  of  Corvey  used  daily  five  fat  and  one  lean  hog,  besides  two  young  ones. 


Sec.  CXXXII.]  HISTORY  OF  TRICES.  399 

tains,  the  price  of  hogs  is  wont  to  increase  largely  with  an  ad- 
vance in  civilization.^  ^^°  (See  Roscher,  Nationalokononiik 
des  Ackerbaues,  §§  177  ff.) 

(Kindlin'^cii,  Miinsterische  Beitr.,  Urkunden,  147,  126.)  In  1345,  at  the  court 
of  Dauphiny,  there  were  used  annually  for  30  persons,  30  salt  and  52  fresh 
hogs ;  whereas,  in  modern  Paris,  with  800,000  inhabitants,  only  32,000  hogs 
are  consumed  yearly.  (Roquefort^  De  la  Vie  privee  des  Fr.,  I,  310  f.)  Com- 
pare herewith  the  place  occupied  by  the  swine-herds  in  the  Odyssey  in 
Greece's  age  of  chivalry.  In  England,  in  the  time  of  William  I.,  woods  were 
taxed  according  to  the  number  of  hogs  they  might  feed.  At  present,  there 
is  an  enormous  production  of  hogs  in  Servia,  which,  in  many  places,  consti- 
tutes the  only  source  of  ready  money  to  the  agricultural  population. 

And  about  the  end  of  the  eighteenth  century,  it  is  said  that  Servia  re- 
ceived from  Austria  alone  1,300,000  florins  yearly  for  hogs.  (liaii/ce,  Serb. 
Revolution,  95.)  In  1S64,  Servia's  total  exports  amounted  to  62,500,000  pias- 
ters, of  which  28,162,260  were  for  hogs,  7,043,000  for  wool,  7,662,000  for  the 
skins  of  sheep  and  deer,  5,732,000  for  cattle,  1,222,400  for  tallow.  (Kaniiz, 
Serbien,  59S  ft")  Great  production  of  hogs  also  in  the  Moldau  and  in  Wal- 
lachia,  in  the  United  States  and  Mexico,  where,  instead  of  butter,  only  lard 
and  suet  are  used;  also  in  Lombardy,  the  Prussian  Rhine  province,  Belgium, 
the  English  milk-producing  districts,  Gloucester,  Wilt,  Dumfries,  Galloway 
and  the  districts  where  agricultural  proletarians  abound  —  Ireland  and  York- 
shire. It  is  a  consequence  of  the  same  law  that,  among  the  South  Sea  Is- 
landers, the  hog  was  the  principal  domestic  animal,  as  it  still  is  among  the 
Chinese.  Similarly  in  tlie  whole  of  Asia,  beyond  the  Ganges  (Ritter^  Erd- 
kunde,  IV,  938,  iioi);  in  semi-barbarous  upper  Italy  in  the  time  of  Polyhios 
(II,  15);  in  Gall  itself,  in  the  time  of  Augustus.  (Strabo,  IV,  192,  197.) 
The  America  of  the  ancient  Greeks,  Sicily,  exported  hogs,  mainly,  in  the 
time  of  Hermippos.  (Athen.^  I,  27.)  And  even  among  the  Romans,  the 
consumption  of  pork  was  much  greater  than  the  consumption  of  beef. 
(Marqicard- Becker,  Handbuch,  V,  2,  39.) 

8  In  the  cities  of  Prussia  subject  to  a  tax  for  the  privilege  of  maintaining 
slaughter  houses,  a  pound  of  beef  cost  on  an  average,  in  1S46,  from  2  silver 
groschens,  5  ffennigs^  to  3  s.  gr.  4  pf. ;  pork,  from  3  s.  gr.  2  pf.  to  4  s.  gr.  4  pf. 
(Dictcn'ct.)  In  Moscow,  also,  the  latter  is  dearer  at  present.  Before  the  time 
of  Peter  the  Great,  it  was  cheaper.  (Siorc//,  Handbuch  1, 364.)  It  was  a  sign 
of  high  civilization,  too,  that  in  Florence,  in  the  fifteenth  century,  veal  cost, 
on  an  average,  2j4  soldi;  mutton,  2^  soldi;  but  pork,  4  soldi.  (Pagnini, 
Saggio  sopra  il  giusto  Pregio  delle  Cose,  325  f.,  Cust.)  It  is  especially  the 
lower  middle  class  who  ask  for  fat  meats.  The  very  fat  English  sheep  are 
taken  not  to  London,  but  into  the  manufacturing  districts.  (Lauderdale,  In- 
quiry, 322  f.)  As  to  whether  the  relatively  high  price  of  pork,  and  the  fact 
that  in  the  later  times  ot  Rome,  the  wild  boar  was  the  most  fashionable  dish, 
compare  Becker,  Gallus,II,  1S6. 


400  CIRCULATION  OF  GOODS.  [B.  II,  Ch.  IV. 


SECTION  CXXXIII. 

HISTORY  OF  THE  PRICES  OF  THE  CHIEF  WANTS  OF  LIFE. 

(CONTINUED.) 

C.  Those  raw  materials  which,  from  the  very  first,  have 
been  obtained  by  the  means  of  production  properly  so  called, 
maintain  a  much  greater  uniformity  in  price.  In  the  lower 
stages  of  civilization,  they  are  never  found  permanently  in 
excess;  and  as  the  economy  of  a  people  advances,  the  grow- 
ing dearth  of  natural  forces  may  be  more  or  less  counter- 

9  The  production  of  fowl  is  similar  in  this,  that  they  are  frequently  fed 
from  remains  of  consumption;  only  their  production  is  not  adapted  to  un- 
civilized countries,  because  it  is  difficult  to  protect  them  there.  In  Texas,  it 
is  said,  it  costs  more  to  raise  ten  chickens  than  to  bring  up  ten  children. 
(Kennedy,  Czarnkowski's  translation,  1846,  115.)  The  independent  breeding 
of  fowl  is  advisable  only  where  there  are  a  great  many  rich  consumers ;  for 
the  reason  that  they  are  naturally  a  delicacy.  Enormous  production  of  pi- 
geons in  Cambridge,  Huntington  etc.  (McCulloch,  Statistical  Accovmt,  I, 
189.)  In  Paris  the  consumption  of  pork  and  fowl  has  gained  somewhat 
since  the  Revolution.     (M^ Chevalier,  Cours.  I,  113.) 

'"  According  to  Schuckburg;  Philosophical  Transactions  of  1798,  and 
Kraus,  Vermischte  Schriften,  I,  tab.  I,  the  prices  of  the  following  species  of 
animals  rose  in  England  between  1550 and  1795:  horses,  904  per  cent;  oxen, 
896  per  cent.;  sheep,  876  per  cent;  cows,  2050  per  cent;  hogs,  1964  per  cent; 
geese,  300  per  cent;  butter  rose  from  5d.  per  pound  to  11^  d.;  beer  from  id. 
per  gallon  to  2^4^d.;  agricultural  day  wages  from  ^s.  to  is.  S/i^-'i  "wheat  326 
per  cent.  Compare,  however,  Edinburg  Review,  III,  246  ff.  In  Germany 
also,  cows  and  hogs  have  increased  much  more  in  price  than  horses  and 
sheep.  (Tiibinger  Ztschr.,  1S71,  342.)  Diitot,  Reflexions,  946  if.,  ed.  Daire, 
says  that  the  value  of  the  precious  metals  in  France  decreased  in  value  be- 
tween the  times  of  Louis  XII.  and  Louis  XV.  in  the  ratio  of  3^f :  i.  On 
the  other  hand,  the  prices  of  difterent  commodities  rise  in  very  different  de- 
grees : 

Fat  sheep  from  7  sous     -  -  -     to  10  livres. 

-  "    5 

"     -  -  to  25— 35 


Lean  " 

"     5 

Hogs 

"  10 

Capons 

"     I 

Hens 

"    1% 

Pigeons 

"     ^y^ 

Deer 

"     i^ 

10 

sous. 

to  12 

(( 

"    6 

« 

"    3 

« 

"  15 

« 

Sec.  CXXXIII.]  HISTORY  OF  PRICES.  401 

balanced  by  the  greater  cheapness  of  capital  and  labor.  This 
is  true,  especially  of  wheat.  (See  §  129,  and  Roscher,  Na- 
tionalokonomik  des  Ackerbaues,  p.  43.)  ^ 

D.  In  the  case  also  of  those  raw  materials  which  are  objects 
of  occupation,  and  never  of  real  production,  as,  for  instance, 
minerals,  a  progressive  public  economy,  by  altering  the  differ- 
ent elements  of  price  in  an  opposite  direction,  may  leave  their 
price  on  the  whole  unchanged.  Here,  indeed,  the  discovery 
of  new  and  especially  of  rich  natural  stores  may  exert  an  incal- 
culable influence ;  but  such  "  accidents "  underlie  the  laws  of 
human  development  only  to  the  extent  that  those  ages  which 
are  intellectually  most  active  are  those  also  which  are  most  in- 
dustrious and  fortunate  in  the  discovery  of  their  natural  re- 
sources. ^ 

'  Thus,  in  Thuringia,  the  average  price  in  silver  of  corn  from  the  sixteenth 
century  until  the  period  1S48-61  increased  in  the  ratio  of  from  i  to  3-4;  the 
price  of  the  different  kinds  of  animals,  on  the  other  hand,  from  i  to  5-10. 
(Knics^  in  Hildebrand''s  Jahrbb.,  1863,  78.)  The  price  of  the  different  kinds 
of  corn  as  compared  with  one  another  may,  however,  be  modified  by  many 
different  circumstances.  Thus  the  Capitulare  Saxoniie  of  797,  c,  11,  esti- 
mated the  prices  of  rye,  barley  and  oats  to  be  to  one  another  as  30:  30:  15; 
while  the  Magdeburg  Chamber  of  1S04  estimated  them  to  be  as  17:  14:  8. 
In  the  kingdom  of  Saxony,  in  1841-9,  the  average  prices  of  wheat,  rye, 
barley  and  oats  stood  to  one  anotlier  in  the  ratio  of  144:  100:  75 :  47  (Engel); 
while,  in  the  middle  ages,  Avheat,  rye  and  oats  were  as  9:6:3  (Gersdorf^ 
Cod.  Depl.  Sax.,  II,  p.  XXXIV);  under  Prince  August,  corn,  barley  and  oats 
were  as  24:  22:  12  Assuming  the  price  of  rye  to  be  equal  to  100,  the  cost 
was: 

At  Brussels,  in  the  i6th  century,     - 
At  Brussels,  in  the  17th  century, 
At  Brussels,  in  the  iSth  century,     - 
At  Brussels,  1815  — 1844, 
At  Brussels,  1841  — 1850, 
At  Berlin,  1 7S9 — 1S18, 
At  Berlin,  1819— 1832, 

(Rail,  Lehrbuch,  I,  §  183.)  To  understand  this,  it  is  necessary  to  bear  in 
mind  the  relatively  great  increase  of  wheat  bread,  beer  made  of  barley,  and 
horses,  as  objects  of  luxury.  The  unusually  low  price  of  oats  in  North 
America,  as  compared  with  the  price  of  wheat,  is  dependent  on  the  facility 

Vol.  I.— 26 


Of  Wheat. 

Barley. 

Oats. 

126.7 

80 

50 

13S.8 

82.9 

51-9 

H7 

86. 7 

55-3 

156 



153 

82.7 

51 

135 

74.8 

54 

H3-S 

74-9 

52 

402  CIRCULATION  OF  GOODS.  [B.  II,  Ch.  IV. 


SECTION  CXXXIV. 

HISTORY  OF  THE  PRICES  OF  THE  CHIEF  WANTS  OF  LIFE. 

[CONTINUKD.] 

E.  The  products  of  industry  become  cheaper  and  cheaper 
as  economic  culture  advances;  whereas,  for  instance,  in  Eng- 
land, towards  the  end  of  the  middle  ages,  a  single  shirt  was 
considered  of  importance  enough  to  be  made  not  unfrequently 
an  object  of  testamentary  bequest.^  And,  indeed,  the  price  of 
industrial  products  sinks  lower  the  more  important  the  part 
played  in  their  production  by  capital  and  the  division  of  labor 
is  as  compared  with  the  part  played  by  the  raw  material.^ 

of  exporting  the  latter.  In  Florence,  in  the  fifteenth  century,  the  price  of 
wheat  was  22^,  of  rye,  12,  of  barley,  8  soldi.  (Pag)iin{,  Sopra  il  giusto 
Pregio  delle  Cose,  325.) 

^  The  English  so  called  custom-house  prices  (Zollhaus^rcise)  correspond  to 
the  market  prices  of  1696.     If  tliese  are  assumed  =  100,  the  price 

In  1826.    In  i8ji. 
Of  steel  and  iron  was,       -  -  -  -         S3  56 

Of  coal  was,     -----  47  4^ 

Between  1S35  and  1850,  Scotch  iron  had  already  become  cheaper  by  one- 
half  (Mcidmger,  387),  and  coal  in  London  by  one-third  (Porter). 

^  Rogers,  History  of  Agriculture,  I,  67. 

-In  England,  in  1172,  an  ox  cost  2  shillings;  in  1175,  green  cloth  cost  per 
ell,  2  II  shillmgs;  red  cloth,  5^  shillings.  (Eden.)  In  the  western  states  of 
North  America,  the  farmer  gives  two  poimds  of  coarse  wool  for  one  pound 
of  woolen  yarn ;  he  sends  4  bushels  of  wheat  to  the  miller  for  the  flour  of 
three  bushels  (Ausland,  1843,  No.  68),  while  in  Ravenna,  in  the  thirteenth 
century,  the  miller's  fee  was  -^^  (von  Raicmcr,  Hohenstaufen  II,  437);  accord- 
to  the  fixed  prices  in  Fantazzi,  (Monumen.  Ravennet.);  in  Germany,  during 
the  last  centuries  of  the  middle  ages,  %  (%  Grimm,  Weisthiimer,  III,  8) ; 
at  the  end  of  the  sixteenth  century  from  -J-  to  ^  (Coler,  Oeconomia,  II,  3);  in 
modern  Germany,  generally  Jg-  of  the  raw  material,  and  in  the  steppes  of 
southern  Russia,  when  the  wind  is  still,  in  summer,  even  the  half  (Mitth. 
der  freien  okonom.  Gesellsch.  zu  Petersburg,  1S53,  85.)  In  Guiana,  in  1806, 
a  very  ordinary  saddle  and  bridle  could  not  be  had  under  10  J4  guineas. 
(Pinchard,  Notes  on  the  West  Indies,  III,  1806.)  Count  Gortz  was  obliged 
to  pay  2  dollars,  in  Demarara,  for  the  cleansing  of  0  rifle,  and  another  person 
for  the  oiling  of  a  carriage,  5  dollars.  (Reise  um  die  Welt,  1864,  327.)  A 
lady's  dress  in  Mobile  costs  four  times  as  much  as  in  London  or  Paris.    (C/i. 


Sec.  CXXXIV.]  HISTORY  OF  PRICES.  403 

On  this  account,  in  recent  times,  fine  cloths  have  grown,  rela- 
tively speaking,  much  cheaper  than  coarse  ones/'  Lead, 
which  during  the  middle  ages  in  England  was  much  cheaper 
than  iron,  because  of  the  difficulty  of  mining  the  latter,  has  be- 
come much  dearer  in  our  days.*  Conversely,  where  raw 
material  plays  the  most  important  part  in  manufactures,  the 
price  of  the  manufactured  article  may  increase  with  an  ad- 
vance in  civilization.  Hence,  articles  made  of  wood  are  pro- 
cured at  the  cheapest  rates  in  mountainous  countries,  where 
the  division  of  labor  is  not  carried  very  far,  but  where  the 
raw  material  is  cheap.^ 

Lyell^  Second  Visit  to  the  United  States,  II,  70.)  In  Athens,  articles  of  cloth- 
ing, even  for  the  poorer  classes,  were  never  as  cheap  as  they  are  in  civilized 
countries  to-day.     Compare  Plutarch^  De  Tranquill.  Anim.,  10.) 

*  In  Upper  Italy,  between  1261  and  1400,  a  lady's  chemise  and  the  making 
of  it  cost  14.77  lire;  Rheims  linen,  7.04;  ordinary  mourning  cloth,  0.45 ;  black 
cloth  from  Moriana,  2.83;  cloth  from  Mecheln,  43.S3;  from  Ypres,  47.04; 
scarlet  cloth,  S0.44  per  ell.  (Cibrario,  1.  1.)  On  the  other  hand,  to-day,  in 
the  Leipzig  m.arket,  the  difterence  in  price  of  the  dearest  and  of  the  cheapest 
cloth  will  scarcely  surpass  the  ratio  iS:  i.  Even  Scariiffi,  SuUe  Moneta, 
1679,  163,  Cust,  remarks  that  hemp-linen  and  similar  coarse  articles  had 
increased  much  more  in  price  than  brocades ;  but  he  ascribes  this  circum- 
stance to  the  disordered  state  of  the  coinage.  It  is  much  better  accounted 
for  by  Adam  Smithy  Wealth  of  Nations,  I,  3S6,  ed.  Basil. 

*  Before  the  plague  in  the  fourteenth  century,  the  cwt.  of  lead  was  worth 
ioj'2d.;  of  iron,  4s.  id.  (Rogers,  I  599.)  On  the  other  hand,  between  1S4S 
and  1S56,  the  average  January  price  of  bar-iron  was  £7,  lis.;  of  lead,  over 
£20.     (Ne-Minmxh.) 

'■'  Thus,  in  England,  the  price  Tear        Tear 

1826.       J831. 

Of  glass  was,   -----      387        369  per  cent. 

Of  leather  was,       -  -  .  -  285         123  per  cent. 

Of  silk  goods  was,       -  -  -  -      158        249  per  cent, 

of  the  price  of  the  same  articles  in  1796.  (Ran.)  Of  29  chemical  products 
of  the  Parisian  manufacture,  the  wages  of  labor  is  on  an  average  only  7.4 
per  cent,  of  the  selling  price;  and,  in  some  cases,  only  from  i  to  2  per  cent. 
(Ckabrol,  Richerches  Statistiques  sur  la  Villa  de  Paris,  1821 ;  Hermann, 
Staatsw.  Untersuch.,  137.)  In  Buschtiehrad,  between  1670  and  1870,  barley 
rose  from  i  to  4.8;  hops  to  6.52 ;  fii-e  wood  to  6.14;  the  excise  to  6.54;  but  beer 
only  to  2.81;  although  wages  increased  ten  fold.  (Inama  Sternegg,  Gesch. 
dcr  Preise  im  ostcrreich.  Ausstellungsbericht  von  1S73,  43.) 


404  CIRCULATION  OF  GOODS.  [B.  II,  Cii  IV. 

F.  But  the  price  of  commodities  decreases,  especially  in  the 
higher  stages  of  civilization,  to  the  extent  that  it  is  dependent 
on  commerce.''  Here  capital  and  human  labor  almost  exclus- 
ively are  effective,  and  the  modern  improvements  of  communi- 
cation, legal  security  and  competition  are  especially  striking^ 

G.  Since  personal  services  are,  as  a  rule,  performed  and 
received  only  by  individuals,  the  principle  in  accordance  with 
which  labor  in  general  becomes  cheaper  in  the  higher  stages 
of  civilization,  does  not  apply  to  them  to  any  great  extent.^  Yet 
we  may  claim  that  advancing  civilization  has  pretty  universally 
a  twofold  influence  on  the  price  paid  for  personal  services.  In 
the  first  place,  freedom  of  competition,  with  the  more  accurate 
and  equitable  determination  of  price  which  it  produces  (in  con- 
tradistinction to  servitude,  privilege  and  custom)  always  tends 

®  A  bilk  cloak  lined  with  fur  cost  in  the  time  of  Charlemagne,  400  schefFels 
of  rye,  one  not  so  lined  200.  (HUlhnann,  Finanzgeschichte,  213  ff.)  In 
Florence  in  the  fifteenth  century,  one  pound  of  sugar  was  equal  in  value  to 
15  pounds  of  mutton.  (Pagm?ii,  326.)  In  Turin,  in  the  fourteenth  century, 
I  pound  of  pepper  was  equal  in  value  to  28  pounds  of  salt.  (Cibrarto,  III, 
359)  362.)  As  late  as  the  middle  of  the  fifteenth  century,  the  court  of  Duke 
William  of  Saxony  paid  for  one  pound  of  sugar  i  thaler  and  8  groschens, 
while  ducal  fees  paid  to  servants  and  workmen  seldom  exceeded  2  gr. 
Hence,  even  at  a  princely  meal,  often  scarcely  j-^  a  pound  was  consumed. 
(Busckiiig,  Ritterzeit,  I,  137  f.) 

■>  Charlemagne's  capitularies  suppose  a  merchant's  profits  to  be  from  100  to 
200  per  cent.  (a.  809,  c.  34.)  And  even  in  our  own  day,  merchants  in  the 
markets  of  Cabul  are  frequently  not  satisfied  with  a  profit  of  from  300  to  400 
per  cent.  (K.  Rttier,  Erdkunde,  VII,  244),  and  the  caravans  which  leave  Ma- 
roc  for  the  Soudan  are  wont,  in  exchange  for  commodities  amounting  in 
price  to  1,000,000  piasters,  to  return  with  a  supply  of  other  commodities  worth 
10,000,000.  ('6'/««-W^«//««-?,  Handbuch,  Africa,  33.)  According  to  Busck, 
Geldumlauf,  II,  10,  the  price  of  East  Indian  products  in  Hamburg  was  some 
70  per  cent,  higher  than  at  home,  wlyle  Pliny,  H.  N.  IV,  26,  speaks  of  a 
price  one  hundred  times  (.?)  as  high;  and  its  spices,  at  the  time  of  Portuguese 
dominion,  were  sold  at  a  profit  of  at  least  600  per  cent.,  in  Europe.  (Craw- 
furd,  History,  VII,  360;  Ritter,  Erdkunde,  V,  872.) 

8  When  Humboldt  found  a  missionary  near  Cumana  who  paid  7  piasters 
for  a  cow,  and  was  obliged  to  pay  17  piasters  for  blood-letting,  rather  unskil- 
fully performed,  he  found  an  illustration  of  one  of  the  peculiarities  of  colo- 
nial life — to  have  all  the  wants  of  higher  stages  of  civilization  but  not  the 
means  of  satisfying  them.     (Relation  historique,  I,  374.) 


Sec.  CXXXV.]  HISTORY  OF  VALUES.  405 

to  obtain  the  upper  hand;  and  further,  by  the  growing  combi- 
nation of  labor  and  of  use  (§§  56,  {l\  207),  a  better  and  better  and 
more  clearl}^  defined  gradation  between  ordinary  services  and 
those  of  a  higher  order  is  effected.  When  the  latter  cannot 
be  increased  at  pleasure,  the  price  paid  for  them  may,  as  the 
wealth  of  consumers  increases,  become,  fi-om  motives  of  van- 
ity or  of  custom  (^Gcbrauchsgrmiden)^  almost  unlimited.  The 
dancing  maid,  to  whom  Herod  (Mark,  6,  23)  promised  even 
the  half  of  his  kingdom,  is  both  in  a  politico-economical  and 
in  a  moral  sense  a  warning  example  to  over-refined  nations.® 

SECTION  CXXXV. 

HISTORY    OF   THE  VALUES  OF  THE   PRECIOUS   METALS.— 
IN  ANTIQUITY  AND  IN  THE  MIDDLE  AGES. 

It  is  impossible  to  write  a  real  history  of  the  values  of  the 
precious  metals  in  ancient  and  medieval  times :  the  sources  of 

^Enormovis  payments  made  to  distinguished  virtuosi,  actors,  sophists  and 
hetares  at  the  time  :n  question,  also  to  Appelles,  Aristides  etc.,  for  works  of 
art.  (Plin.,  XXXIV,  19,  2,  XXXV,  36,  19.)  The  actor  Aesopus  (see  §  233, 
note  6)  had  a  fortune  worth  20,000,000  sesterces,  while  Pompey,  for  instance, 
had  70,000,000.  Roscius  received  from  the  state  for  every  day  he  played, 
2S6  thalers,  and  earned  43,000  a  year.  ( Mommsen,  Romische  Geschichte,  III, 
483,  547.)  Compare  Cicero,  pro  Roscio  Comoedo,  10,  and  Plin.,  H.  N.  IX,  59, 
X,  72.  The  zither-player,  Amoebaeos,  received  one  talent  for  each  appear- 
ance. (Athen.  XIV,  623.)  According  to  Pliny,  H.  N.  XXIX,  5,  the  Roman 
frincipes  gave  the  most  distinguished  doctors  yearly  250,000  sesterces,  and 
even  more  as  an  honorarium.  At  the  end  of  the  eighteenth  century,  the 
greatest  Parisian  actors  received  from  4,000  to  5,000  francs  per  annum.  Now 
100,000  is  considered  a  moderate  income  for  one.  ( Journ.  des  Economistes, 
May,  1854,  279.)  It  is  said  that  Frederick  Hase  earned  $30,000  in  America 
in  ten  weeks.  (Leipz.  Tagebb.,  15  Jan.,  1871.)  Steuart,  Principles,  II,  ch. 
30.  Adam  Smith  frequently  represents  it  as  a  rule,  that  superfluous  goods 
like  gold  and  silver,  are  dearest  among  the  richest  nations,  necessary  goods 
among  the  poorer,  and  vice  versa.  But  the  supply  has  much  more  to  do  with 
the  permanent  price  of  a  comm.odity  than  the  demand  for  it  has.  And  the 
principle  above  mentioned  applies  only  in  so  far  as  the  supply  is  here  an  un- 
limited and  there  a  limited  one.  Hence,  the  comparison  of  silver  with  paint- 
ers' and  sculptors'  works  is  not  an  apposite  one :  in  the  case  of  these  there  is  a 
natural  monopoly,  while  the  former,  on  account  of  its  durability  and  capacity 
for  transportation,  may,  on  the  contrary,  be  increased  almost  at  pleasure. 


406  CIRCULATION  OF  GOODS.  [B.  II,  Ch.  IV. 

information  are  too  few.  But  it  does  seem  possible  to  sug- 
gest some  fragments  and  something  of  the  development  of  that 
history/  at  least  in  outline. 

Thus,  for  instance,  the  supply  of  the  precious  metals  fur- 
nished by  the  mines,  in  the  earlier  times  of  ancient  history, 
was  kept  from  entering  the  market  by  the  system  which  then 
prevailed  everywhere,  of  hoarding  treasure  by  the  state,  by 
the  temples  etc.,  and  later  by  great  reserves  of  treasure  kept  by 
individuals.^  The  revolutions  in  prices  in  ancient  times  were 
produced  as  frequently  by  the  sudden  opening  of  such  reser- 
voirs, as  by  the  discovery  of  richer  sources.  Thus,  for  in- 
stance, such  events  as  the  dissipation  of  Pericles'  treasures,  the 
subsidies  of  the  Persian  kings,  the  spoliation  of  many  temples 
in  consequence  of  declining  religiousness,  the  distribution  of 
Persian  treasures  by  Alexander  the  Great,^  had  a  vast  influ- 
ence on  the  undeniable  rise  in  the  price  of  Greek  commodi- 
ties in  the  century  succeeding  the  Peleponnesian  war.*  Later, 
it  is  said  that  in  Rome,  the  price  of  pieces  of  land  was  doubled 

'  Besides  Bochh.^  Staatshaushalt  der  Athener,  1S17,  Book  I,  compare  Ar- 
buthtot^  Tables  of  ancient  Coins,  Weights  and  Measures,  2d  ed.,  1754,  Reit- 
mcyei\  Ueber  den  Bergbau  der  Alten,  1785,  and  Michaelis,  De  Pretiis  Re- 
rum  apud  veteros  Hebrseos,  in  the  Comment.  Societ.  Gottingensis,  vol.  III. 
The  principal  sources  of  information  among  the  ancients  are  Diodor.^  V ; 
Strabo,  III,  V;  Plin.,  H.  N.,  XXXIII. 

-The  money  revenue  of  the  Persian  king,  to  the  amount  of  14,560  talents 
yearly,  was  transformed  into  bars  and  thus  deposited  in  the  treasury.  Hero- 
dot.^  Ill,  95  f.  Even  the  little  vassal  prince  Pythios  of  Celzcnje  had  a  treas- 
ure of  2,000  talents  of  silver  and  4,000,000  pieces  of  gold.  (Ibid,  VII,  26  f.) 
On  the  money  stores  of  private  persons,  see  Plin.,  H.  N.,  XXXIII,  47. 

2  An  ox  vi^as  worth,  in  Solon's  time,  5  drachmas;  in  410  B.  C,  51  dr.;  374 
B.  C,  77^  dr.;  a  medimnos  of  wheat  in  Solon's  time,  i  dr.,  about  390,  3  dr., 
under  Alexander  the  Great,  on  an  average,  5  dr.  (Bochh.,  I,  102,  f.)  The 
usual  amount  of  ransom  paid  for  a  prisoner  of  war,  in  Kleomenes'  time, 
was  2  minse  (Hcrodot.,  V,  77,  VI,  79) ;  under  Dionys.,  I,  300  m.  (Aristot., 
Oeconom,  II,  21);  under  Philip  of  Macedon,  from  300  to  400  m.  (Demosth., 
De  fals.  Legat.,  394);  under  Demetrios  Poliorketes,  1,000  for  a  free  man, 
5  for  a  slave.     (Dtod.,  XX,  84.) 

4 This  booty  for  Susa  alone  amounted  to  fi'om  40,000  to  50,000  talents;  for 
Persepolis,  to  120,000;  for  Pasargadse.  to  600.  Curtius,  V,  2,  6;  Strabo,  XV, 
731 ;  Justin,  XI,  14;  Arnau,  III,  16;  Dwd.,  XVII,  66,  71 ;  Plutarcli,  Alex.,  36. 


Sec.  CXXXV.]  HISTORY  OF  VALUES.  407 

by  the  influx  of  Egptian  war-booty/'      It  is  a  remarkable 
proof  of  the  undeveloped  condition  of  trade  in  the  earlier  pe- 
riods of  ancient  history,  that  the  perturbations  in  prices  were, 
apparently,  at  least,  so  entirely  local.      Phccnecia,  Palestine 
etc.,  must  have  experienced,  in  the  age  of  Solomon,  a  formal 
deluge  of  the  precious  metals,  while  Greece,  for  instance,  was 
then,  and  for  centuries  after,  extremely  poor  in  them.^     It  is 
not,  on  the  whole,  to  be  doubted,  that  the  value  in  exchange 
of  the  precious  metals  was  on  a  continual  decline  until  the 
most  flourishing  time  of  the  Roman  emperors.''^     During  the 
middle  ages,  it  seems  to  have  stood  much  higher  again;  be- 
cause the  great  loss  of  treasure  caused  by  the  migration  of 
nations  etc.,  the  almost  complete  cessation  of  production  at  the 
mines,  and  the  slowness  of  the  circulation  of  money,  played 
a  much  more  important  part  than  the  decrease  of  trade.^  ^ 

*  Of'os.,  VI,  19;  £>to,  C,  LI,  21;  Suet,  Aug.,  41.  Decline  of  the  value  of 
money  under  Constantine  the  Great,  when  the  precious  objects  of  the  heathen 
temples  were  coined.  (Monitio  ad  Theod.,  Aug.  de  inbidenda  Largitate, 
T/ies.,  Antt.  Renn.,  XI,  1415;  Taylor,  ad  Warm.  Sandvic,  38.) 

6  Compare  I  Kings,  10,  14,  27  fF.;  I  Chron.,  22,  2  fF.;  II  Chron.,  9,  15  f., 
12,  10  ff.  On  Ophir:  K.  Ritter,  Erdkunde,  XIV,  407  f ;  on  the  wonders  of 
the  discovery  of  Spain:  Herodot.,  IV,  152.  Aristot.,  De  Mirab.,  146;  Diodor, 
V,  35  ft".     On  the  other  hand,  of  Greece,  Athcn.  VI,  19  ff. 

'  Compare  Plin.,  H.  N.,  XIV,  i.  Yet  the  value  of  money  in  the  time  of 
the  Caesars  seems  to  have  stood  much  higher  than  it  is  now,  as  is  proved,  for 
instance,  by  the  endowments  by  Trajan  (16  sesterces  per  month  for  boys, 
and  12  sesterces  per  month  for  girls),  as  the  alimenta  furnished  them  accord- 
ing to  Digest  XXXIV,  i,  embraced  their  entire  support.  Compare  the  ex- 
cellent essay  on  this  subject  by  Rodhertus,  in  Hildebrand's  Jahi-bb.,  1S70,  I. 

8  The  conquest  of  the  Avares  seems  to  have  temporarily  produced  a  consider- 
able cheapness  of  the  precious  metals.  (Gudrard,  Polyptiques,  I,  141.)  In- 
crease of  the  value  of  money  in  Scandinavia,  during  the  later  part  of  the 
middle  ages.     (Wilda,  Gesch.  des  deutschen  Sti-afrechts,  I,  323  if.) 

^  In  England,  from  1279  to  1509,  there  were  coined  on  an  average  only 
6,86S>^  pounds  sterling;  from  1603  to  1830,  on  the  other  hand,  819,415  pounds 
sterling.  The  average  in  the  time  of  George  IV.,  per  annum,  was  4,262,652. 
Jacob,  ch.  IV.)  An  evidence  of  the  uncertainty  of  the  history  of  prices  in 
the  middle  ages  is,  that  Jacob,  ch.  12,  infers,  from  the  price  of  corn,  that  the 
price  of  silver  remained  rather  stationary  from  1120  to  1550,  while  Adam 
Smitli,  I,  ch.  II,  3,  infers  from  the   same   fact,  a  remarkable  rise   in  the 


408  CIRCULATION  OF  GOODS.  [B.  II,  Cii.  IV. 


SECTION  CXXXVI. 

c 

EFFECT   OF  THE   DISCOVERY  OF   AMERICAN  MINES    ETC. 
ON  THE  VALUE  OF  THE  PRECIOUS  METALS. 

The  discovery  of  America  influenced  the  market  of  the 
precious  metals  less  by  the  peculiar  wealth  of  the  mines  in  that 
part  of  the  world  than  by  their  ahuost  incredible  number.^ 
The  sources  of  wealth  that  the  conquistadores  first  lighted 
upon  were,  however,  much  over-estimated.^  The  production 
of  the  American  mines  first  assumed  great  importance  after 
the  discovery  of  Potosi,  in  1545,  which  was  soon  followed  by 
the  working  of  the  American  mines  at  Guanaxuato.     (1558.) 

price  of  silver  from  1350  to  1570,  Concerning  the  latter,  see  Leber,  Fortune 
privde  au  mojen.  Age,  16  f.  Tooke-Neivmarch^  History  of  Prices,  VI,  391 ; 
whereas  i?c^er5.  Statist.  Journ.,  1S61,  544  ff.,  finds  that  in  England,  between 
1300  and  1532,  there  was  no  change  whatever  in  the  pi-ice  of  silver.  Accord- 
ing to  Soetbeer,  Forschungen  zur  deutschen  Geschichte,  VI,  94,  wheat  and 
rye  were,  as  compared  with  silver,  worth  during  the  Carolingian  period, 
about  one-fourth  of  its  value,  between  1750  and  1S50.  //^?o-c/,  Shassburger 
Chroniken,  II,  1012,  ascribes  to  gold  over  2|^  times  as  great  a  puixhasing 
power  in  the  13th  and  14th  centuries  as  in  the  19th  century;  and  to  silver,  a 
purchasing  power  about  three  times  as  great. 

'  The  silver  ores  of  Peru  and  Mexico  yield,  on  an  average,  only  from  2  to 
3  per  1,000  of  metal;  those  of  Potosi,  at  present,  scarcely  i  per  1,000;  those 
of  Mexico,  according  to  Humboldt,  on  an  average,  from  3  to  4  ounces  per 
cwt. ;  so  that  many  of  the  European  ores  are  decidedly  richer.  While  the 
veins  of  the  Saxon  mine,  Himmelsfurst,  have  a  breadth  of  only  from  0.2  to 
0.3  meters ;  the  Veta-Madre  of  Guanaxuato,  is  in  few  parts  less  than  8,  and 
it  is  sometimes  even  50  meters  broad ;  and  the  Veta-Grade  of  Zacatecas  is 
from  5  to  ID  meters  in  breadth.  In  Pasco  there  are  veins  of  silver  ore  which 
have  114  and  even  123  meters.  Tschudi,  Reise  in  Peru,  K.,  12;  Chevalier, 
Cours,  III,  184  flf.,  241  lY.  According  to  Humboldt,  Essai  sur  la  Nouvelle 
Espagne,  III,  p.  413,  eleven  times  as  many  miners  are  needed  at  Himmels- 
fiirst  as  at  Valenciana  to  obtain  the  same  quantity  of  silver. 

^  Thus,  for  instance,  the  celebrated  ransom-money  of  Athahualpa  (even  ac- 
cording to  Garcilaso  de  la  Vega)  amounted  to  only  5,000,000  thalers,  while 
the  French  King  John,  after  the  battle  of  Poitiers,  in  1356,  had  to  pay 
41,000,000  francs  for  his  ransom.  (Leber,  Fortune  privde  au  moyen  Age, 
121  ff.) 


Sec.  CXXXVI.]      EFFECT  OF  NEW  DISCOVERIES.  409 

Coincident  with  this  was  the  extraordinaiy  "  chance  "  of 
Medina's  invention,  in  1557,  by  means  of  which,  it  became 
possible  to  separate  silver  from  foreign  elements  by  the  cool 
process  of  amalgamation,  instead  of  melting  it  as  had  hither- 
to been  done ;  an  invention  all  the  more  important  in  America, 
for  the  reason  that  in  that  country,  where  there  is  so  much 
rich  ore,  there  is  scarcely  any  fuel,  in  the  neighborhood  ^  of 
where  it  is  found.  During  the  first  hundred  years  the  mines 
of  Peru  occupied  the  most  prominent  place;  whereas  they 
were  afterwards  completely  overshadowed  by  the  Mexican.'^ 
According  to  Humboldt,^  the  annual  export  of  gold  and  silver 
from  America  to  Europe,  between  1492  and  1500,  amounted 
to  250,000  piasters;  between  1500  and  1545,  to  3,000,000;^ 
from  that  time  to  1600,  to  11,000,000;  in  the  seventeenth  cen- 
tury, to  about  16,000,000;  during  the  first  half  the  eighteenth 
century  to  22,500,000;  during  the  second  half,  to  35,300,000. 

The  production  of  gold  in  Brazil  began  to  be  important 
after  the  commencement  of  the  eighteenth  century,'''  and  the 
working  of  the  Mexican  silver  mines  of  Valencia,  Biscaina  etc. 
from  the  middle  of  the  same  century.  In  the  beginning  of  the 
nineteenth  century,  Mexico  produced,  annually,  537,512  kilo- 
grammes of  silver,  and  1,609  kilogrammes  of  gold;  Peru, 
140,078  and  782  of  silver  and  gold  respectively;  Buenos 
Ayres,  1 10,764  and  506;  Chili,  6,827  and  2,807  '■>  New  Granada, 
4,714  kilogrammes  of   gold;    Brazil,  3,700  kiUogrammes  of 

^Compare  M.  Chevalier,  III,  190  ff.  Discovery  of  the  quicksilver  mines 
of  Guancavelica,  1567. 

^  The  yield  of  Potosi  amounted  from  1545  to  1638,  to  395,619,000  pesos. 
( Ulloa,Wa.^Q,  II,  I,  13.)  Up  to  the  present  time,  the  aggregate  yield  there 
has  been  estimated  at  from  6,000  to  7,000  million  francs. 

^  On  the  worse  grounded  assumptions  of  former  writers,  see  Humboldt, 
N.  Espagne,  IV,  237. 

*  There  was  really  introduced  into  Spain,  about  1525,  not  much  over  2,000,- 
000  francs  annually;  and  after  1550,  six  times  as  much.  (L.  Ranke,  Fiirstcn 
und  Volkcr,  I,  347  ff.)  Compare  Humboldt,  Ueber  die  Schwankungcn  der 
Goldproduction,  in  the  Vierteljahrsschrift,  183S,  IV,  iS. 

1  On  the  Brazilian  exports  of  gold  in  the  iSth  century,  see  Sddfcr,  Gesch. 
von  Portugal,   V,  192  ff. 


410  CIRCULATION  OF  GOODS.  [C.  II,  Cii.  IV. 

gold;  the  whole  of  America  together,  795,581  kilogrammes  of 
silver  and  14,018  kilogrammes  of  gold,  worth  about  60,750,000 
thalers.^  During  the  uprisings  between  1810  and  1825,  which 
separated  Spanish  America  from  the  mother  country,  the 
production  of  the  mines  diminished  as  surprisingly  as  it  had 
increased  in  the  previous  generation  by  reason  of  the  great- 
er liberality  of  Spanish  colonial  polic3\^  Since  that  time, 
a  certain  increase  has,  indeed,  been  noticed,  which,  however, 
had  not  immediately  before  the  discovery  of  the  gold  mines  of 
California  by  any  means  attained  the  height  reached  in  1808, 
but  only  an  annual  production  of  701,570  kilogrammes  of  sil- 
ver, and  of  15,215  kilogrammes  of  gold,  with  an  aggregate 
value  of  more  than  56,000,000  thalers.^" 

In  Europe,  also,  the  obtaining  of  the  precious  metals  dur- 
ing the  fifteenth  and  sixteenth  centuries  took  a  great  stride, 
especially  in  Germany  ;^^  but,  on  the  other  hand,  the  Spanish 
gold  and  silver  mines  were  closed  in  1535  by  a  law.  In  the 
seventeenth  century,  there  was  another  lull,  followed,  at  the 
end  of  the  eighteenth,  by  a  second  period  of  activity  which  has 
not  yet  closed.  The  great  development  of  the  production  of 
gold  in  the  Ural  mines  since  18 19,  and  in  the  Altai  mines  since 
1829,^^  the  revival  of  the  production  of  silver  in  the  old  Spanish 

'According  to  Humboldt.,  N.  E.,  IV,  218,  the  amount  up  to  the  beginning 
of  tliis  century  Avas  17,000  kilogi-amnies  of  gold  and  800,000  kilogrammes  of 
silver. 

'  Thus,  for  instance,  Mexico,  during  this  period  yielded,  on  an  average, 
65,000,000  francs,  instead  of  the  former  amount  of  from  130,000,000  to 
140,000,000.  In  Carro  de  Potosi,  there  were,  in  1S26,  of  the  former  132  pool- 
,  works  only  12  in  operation.  Compare  Adams.,  The  Actual  State  of  the 
Mexican  Mines,  1S22.  Jacob  assumes  that  about  1830,  the  quantity  of  money 
in  Europe  and  America  was  ith  less  than  in  1809.     (Ch.  28.) 

^'^  Of  this,  1,800  killogrammes  of  gold  from  the  United  States. 

"  Fischer.,  Geschichte  des  deutschen  Handels,  2d  ed.,  II,  616  ft'.,  673  ff.  But 
the  Schwaz  mines,  in  the  Tyrol,  are  said  to  have  produced,  until  1523, 
55,000  marks  annually;  the  Freiberg  silver  mine,  from  1542  to  1616,  16,000 
marks  annually.     Compare  von  Langen,  Kurfiirst  Moritz,  II,  56. 

'^The  Russian  gold  ores,  quite  insignificant  before  the  year  1814,  have 
made  very  great  progress  since  1840.  Their  aggregate  yield,  between  1814 
and  1861,  not  taking  into  account  the  amount  embezzled,  amounted  to  37,000 


Sec.  CXXXVIL]        REVOLUTION  IN  PRICES.  411 

mines  shice  1835,^^  and  Pattinson's  discovery,  by  means  of 
which  the  poorest  lead  ores  containing  silver  may  be  refined, 
are  here  of  great  importance.^^  Shortly  before  1848,  it  was 
estimated  that  all  the  mines  of  the  old  world  produced  annu- 
ally about  274,cxx)  kilogrammes  of  silver,  and  56,000  kilo- 
grammes of  gold,  with  an  aggregate  value  of  over  69,000,000 
thalers."  ^^ 

SECTION   CXXXVIL 

REVOLUTION  IN  PRICES  AT  THE  BEGINNING  OF  MODERN 

HISTORY. 

The  mere  discovery  of  new  and  richer  mines  need  not,  of 
itself,  lower  the  price  of  the  precious  metals.  Their  price  de- 
pends on  their  cost  of  production;  and  it  may  be  very  much 
increased,  even  under  the  most  favorable  natural  conditions, 
by  the  unskillfulness  of  labor,  the  dearness  of  the  means  of 

fuds,  the  ;pud  being  equal  to  16.3  kilogrammes.  The  best  year,  1847,  gave 
a  yield  of  i,^c^'j  fuds;  1852-1861,  an  average  of  1,556 /«(/.?/  1S61  alone,  1,442 
j>itds,  of  which  1,041  came  from  the  private  Siberian  gold-sand  washings. 
(Walcher^  in  Faucher's  Vierleljahrsschrift,  1S69,  II,  115.) 

"Spanish  silver  production  yielded,  in  1845,  over  184,000  marks;  in  1850, 
over  291,000.     (Willkomm^  Halbinsel  der  Pyranaen,  1855,  537.) 

'■*  Annales  des  Mines,  X,  831  fl'. 

'^  Of  this  amount,  there  came  to  Europe,  not  including  Russia,  150,000 
kilogrammes  of  silver,  2,650  kilogrammes  of  gold;  to  Russia,  24,000  kilo- 
grammes of  silver  and  30,000  kilogrammes  of  gold  (embracing  the  quantities 
probably  withdrawn  without  the  knowledge  of  the  custom's  authorities) ;  to 
the  rest  of  Asia,  100,000  kil.  of  gold;  to  Africa,  4,000.     (M.  Chevalier.) 

'^  According  to  Humboldfs  assumption  before  the  time  of  Columbus,  Eu- 
rope had  a  circulation  of  170,000,000  piasters;  about  1600,  of  600,000,000; 
about  1700,  of  1,400,000,000;  in  1809,  of  about  1,824,000,000.  Up  to  1803, 
there  Avas  produced  in  America,  9,915,000  marks  (Spanish)  of  gold,  and 
512,700,000  of  silver.  (N.  E.,  245.)  (?«//«;?/"«  estimates  that,  before  Columbus, 
there  were  1,600,000,000  francs;  in  1830,  in  Europe  and  America,  from 
22,000,000,000  to  27,000,000,000  francs.  (Considerations  on  the  Currency  and 
Banking  System  of  the  United  States,  1831.)  According  to  M.  Chevalier, 
1850,  all  the  silver  which  America  produced  had  a  volume  of  only  11,657 
cubic  meters ;  and  all  the  gold  of  only  151  cubic  meters.  The  latter,  there- 
fore, would  not  even  fill  the  half  of  a  French  gentleman's  salon. 


412  CIRCULATION  OF  GOODS.  [B.  II,  Ch.  IV. 

subsistence,  of  machinery  and  of  auxiliary  substances,  by  inse- 
curity to  property  or  to  the  person ;  by  war,  oppressive  taxes^ 
etc.  The  new  mines  can  produce  a  decline  in  the  price  of  the 
precious  metals  only  to  the  extent  that,  for  the  same  amount 
of  capital  and  labor  expended,  they,  spite  of  all  such  deduc- 
tions, produce  a  greater  result.  ~ 

I  opine  that  the  price  of  metallic  money,  since  the  discovery 
of  America,  has  diminished  until  the  present  time  in  the  ratio 
of  from  three  to  four  to  one.  *     The  prices  of  wheat  in  France, 

'  All  the  more  in  favor  with  governments  because  they  affect  principally 
foreign  consumers.  Thus,  the  Spanish  government  at  first  imposed  a  tax  of 
50  per  cent,  of  the  gross  yield  of  the  raw  material,  on  the  purchaser  of  sil- 
ver; since  1503,  under  Orando,  of  33 J^  per  cent,;  and  later  yet,  of  20  per 
cent.  This  last  tax  was  therefore  in  full  force  under  Cortes.  This  tax  was 
reduced  in  Mexico,  in  1725,  and  in  Peru  in  1736,  to  10  per  cent,  and  later,  in 
the  case  of  gold,  to  3  per  cent.  Heavy  taxation  of  Russian  gold  ore  (35  per 
cent,  of  the  raw  material),  by  virtue  of  the  ukase  of  April  14,  1849.  Compare 
M.  Chevalier,  III,  274. 

*  Cantillon,  Nature  du  Commerce,  215,  236,  shows  very  clearlj"-  how  the  in- 
crease of  the  price  of  commodities  was  produced,  in  the  first  instance,  by  the 
increased  consumption  of  the  possessors  of  gold,  and  how  it,  therefore,  first 
affected  those  commodities  which  they  especially  desired. 

*  This  is  the  opinion  of  Adam  Smith.  Similarly  of  David  Hume,  On  Money. 
According  to  Letronne,  Considerations  sur  I'Evaluation  des  Monnaies  Grec- 
ques  et  romaines,  119,  and  Bockh,  Staatshaushalt,  I,  88,  the  average  value  of 
wheat  in  relation  to  silver  was,  in  Athens,  400  B.  C,  as  1 :  3146;  in  Rome,  50 
B.  C,  as  i:  2681;  in  France,  shortly  before  1520  after  Christ,  as  1:4320;  in 
the  nineteenth  century  it  is  as  1 :  1050.  Th.  Smith,  De  Republ.  Anglorum, 
I,  assumes  that  the  price  of  silver,  from  the  age  of  chivalry  to  1625,  decreased 
in  the  ratio  of  120:  40.  The  Spaniard,  Moncado  (1619),  says  as  6:  i.  (Jacob, 
ch.  19.)  Jacob,  himself,  in  comparison  with  his  own  time,  as  7:  i  (ch.  15.) 
Much  more  moderate  is  JVewmarch  in  Tooke's  History  of  Prices,  VI,  345  ff., 
who  assumes  an  increase  in  the  prices  of  commodities  of  about  200  per  cent. 
The  estimated  value  of  tithe-wine  (Zehntivein)  about  doubled  in  lower  Aus- 
tria, during  the  sixteenth  century.  (Oberleitner,  Finanzlage  N.  Oesterreichs 
im  16  Jahrhundert,  36.)  According  to  the  important  researches  of  Mantellier, 
Memoires  de  la  Societe  Archdologique  de  1'  Orleanais,  vol.  1, 103  ff.;  extract  of 
Lespeyrcs  in  Hildebrand' s  Jahrb.,  1S65, 1,  i,  the  purchasing  power  of  silver  as 
compared  with  the  average  value  of  twenty-seven  commodities,  assuming  it 
to  have  been  i  from  1750  to  1850,  was,  from  1350  to  1450,  2.9;  from  1450  to 
1550,  2.8;  from  1550  to  1650, 1.5 ;  from  1650  to  1750,  2.1.  According  to  Rogers, 
the  prices  of  corn  in  relation  to  silver  were  from  1596  to  1636,  at  most  2.3 


Sec.  CXXXVII.J        REVOLUTION  IN  PRICES.  413 

from  1800  to  1850,  were  about  seven  times  as  great  as  in  the 
second  half  of  the  fifteenth  century;  and  in  England  about  six 
times  as  great.  But,  it  is  not  to  be  overlooked  here,  how 
wheat  may  have  grown  dearer  in  itself  (an  sich)  and  how  gold 
declined  considerably  less  than  silver.  True,  this  decline  of 
the  precious  metals  was  not  an  entirely  steady  one.  We  meet 
at  the  beginning  of  the  modern  era  with  a  real  revolution  in 
prices.  The  prices  of  rye,  in  lower  Saxony,  from  1525  to 
1550,  were  twice  as  high  as  fi-om  1475  to  1500.  According 
to  Gamier,  the  French  prices  of  wheat,  from  1450  to  1500, 
were,  on  an  average,  4.08  francs  of  the  present  time  per  sctkr; 
from  1501  to  1520,  5  francs;  from  1522  to  1540,  11.26  francs; 
from  1541  to  1560,  11.69  francs;  from  1561  to  1580,  21.33 
francs;  from  1581  to  1600,  32.51  francs;  during  the  first  half 
of  the  seventeenth  centur}-,  22.77  francs;  in  the  second  half, 
26.83  francs;  from  1701  to  1750,  19.64  francs.  Similarly  in 
England,  where  wheat  cost,  from  1560  to  1600,  2.64  times  as 
much  as  from  1450  to  1500.* 

times  as  high  as  from  1260  to  1400;  from  1637  to  1700,  2.6  times;  from  1701  to 
1764,  2.1  times;  from  1726  to  1S20,  3.2  times.     (Rogers,  I,  iSo.) 

*  In  Germany,  the  rise  in  prices  was  first  observed  in  the  price  of  foreign 
groceries,  which  partly  rose  400  per  cent.  Popular  opinion  looked  for  the 
cause  in  the  evil  disposition  of  the  large  commercial  houses.  In  order  to 
facilitate  the  competition  of  the  smaller  houses  with  the  larger,  the  Reichstag, 
in  1522,  prohibited  all  companies  with  a  capital  of  more  than  50,000  florins; 
and,  in  1524,  the  royal  treasury  Avished  to  bring  suit  against  the  violators  of 
this  law.  But  the  cities  contrived  to  avert  the  blow.  (L.  Ranke,  Geschichte 
der  Reformation,  II,  42  ff.,  134  fl'.)  In  Spain,  the  government,  especially  be- 
tween 1550  and  1560,  endeavored  to  oppose  the  growing  dearness  of  goods 
of  all  kinds,  by  prohibiting  the  exportation  of  the  most  important  commodi- 
ties, and  by  putting  obstacles  in  the  way  of  retail  trade.  The  lower  classes 
in  England  ascribed  the  rise  to  the  suppression  of  the  monasteries  (Percy, 
Reliques  of  ancient  Poetry,  II,  296),  while  Henry  VIII.  endeavored  to  im- 
prove the  condition  of  things  by  laws  against  luxury,  the  governmental 
establishment  of  fixed  prices,  the  expulsion  of  foreign  merchants  etc.  (21 
Henry  VIII.)  The  first  writer  who  seems  to  have  clearly  seen  the  true 
cause  of  the  changes  in  price  was  Bodhitis,  Response  aux  Paradoxes  de  Mr. 
de  Malestroit  touchant  I'Encherissement  de  toutes  Choses  et  des  Monnaies 
(11568).    This  work  was  translated  into  Latin  by  H.  Cotiring^  1671;  and  done 


4:14:  CIRCULATION  OF  GOODS.  [B.  II,  Ch.  IV. 

Now,  the  increased  production  of  the  mines  cannot  be  the 
only  cause  of  this  great  perturbation  in  prices.  It  commenced, 
in  most  countries,  at  a  time  when  the  supplies  from  America 
were  still  too  small  to  account  for  such  an  effect.  One  of  the 
chief  causes  of  the  phenoinenon  was,  that  precisely  at  this  pe- 
riod, there  was  in  so  many  nations  a  transition  from  a  sluggish 
circulation  of  money,  made  still  more  sluggish  by  the  custom 
which  everywhere  prevailed  of  hoarding  treasure,  to  a  rapid 
circulation,  which  was  inade  still  more  rapid  by  the  use  of  all 
kinds  of  substitutes  for  money.  (§  123).^  In  the  earliest  ripe 
fruit  of  European  civilization  (Italy),  this  transition  had  long 
been  accomplished;  and,  on  that  account,  the  value  in  ex- 
change of  the  precious  metals  was  there,  for  a  long  time  pre- 
vious, comparatively  low.'' 

From  the  second  third  of  the  seventeenth  century,  the  value 
of  the  medium  of  circulation  seems,  on  the  whole,  to  have  re- 
mained stationaiy,''^     Tooke  seeks  to  demonstrate  the  steady 

over  in  the  Avoi-k:  Discours  sur  les  Causes  de  I'extrSme  Chertd,  qui  est 
aujourd'hui  en  France  (1574).  Next,  Ave  have  the  English  author  W.  S., 
A  Compendious  or  briefe  Examination  of  certayne  ordinary  Complaints  of 
divers  of  our  Countryinen  of  these  our  Daj's,  London,  1581.  In  BefohVs 
Vitoe  et  Mortis  Consideratio  politica,  1623,  13  f.,  we  have  a  right  explanation 
of  the  caritas  sine  inopia  which  is  to  be  considered  as  the  common  property 
of  his  time. 

5  Similarly  ^ues>tay,  77,  Daire.  Sir  ji^.  Stetvart^  Principes,  ch.  3.  Kraus, 
Vermischte  Schriften,  II,  131  ft".  Hennan7t,  Staatsw.  Unters.,  127.  Hclferich^ 
Von  den  periodischen  Schwankungen  im  Werth  der  edlen  Metalle,  1S43, 
70  f. 

^  According  to  Cibrario,  a  hectoliti-e  of  wheat  was  worth,  in  Turin,  from 
12S9  to  1379,  on  an  average,  905  gr.  of  fine  silver;  that  is,  about  three  times 
as  much  as  in  Paris  before  the  discovery  of  America,  and  as  much  as  in 
Paris  from  1546  to  1556.  In  Turin,  from  1825  to  1835,  it  was  worth  about 
1702  gr.  In  the  fifteenth  century  even,  the  foreign  embassadors  complain  of 
the  enormous  cost  of  living  there.  So,  for  instance,  Ratimer's  histor.  Tasch- 
enbuch,  1833,  162.  Compare  also,  Carli,  Del  Valore  della  Proporzione  dei 
Metalli  monetati  con  i  Generi  in  Italia  prima  delle  Scoperte  dell'  Indie, 
1760,  in  which  he,  indeed,  exaggerates  the  matter,  and  seeks  to  prove  his 
views  by  the  coarsest  sophistry. 

■"  The  chief  result  of  HelfericKs  excellent  researches.  (HelfericJt,  loc.  cit.) 
The  general  opinion,  indeed,  is  that  this  statu  quo  of  the  value  of  the  pre- 


Sec.  CXXXVIL]         REVOLUTION  IX  PRICES.  415 

decline  of  the  value  of  money  until  late  in  the  eighteenth  cent- 
ury, from  the  fact  that  the  wages  of  labor  increased  during 
that  time;  but  I  should  rather  connect  the  latter  phenomenon 
with  the  simultaneous  elevation  of  the  classes  engaged  in 
manual  labor.  And  so  Adam  Smith  infers  a  rise  in  the  price 
of  money  after  the  beginning  of  the  eighteenth  century,  from 
the  prices  of  wheat  ;^  but  it  would  be  better  to  consider  the 
cause  of  this  to  be  the  unusuall}'  long  series  of  good  crops.^ 
An  equally  unusually  long  series  of  bad  harvests,  during  the 
second  half  of  the  centur}',  accounts  satisfactorily  for  the  sim- 
ultaneous rise  of  the  medium  prices  of  corn.  The  great  war 
which  lasted  from  1793  to  1815,  too,  according  to  a  very 
prevalent  opinion,  must  have  caused  the  value  of  money  to 
decline;  a  fact  which  is  generally  accredited  to  the  increase 
of  paper  money  in  so  many  states. 

Every  great  w^ar  may  very  easily  have  for  effect  to  slacken 
the  speed  of  the  circulation  of  mone}",  to  promote  the  hoard- 
ing and  even  the  burial  of  treasure  for  a  rainy  day,  and  to  par- 
alyze credit  and  its  power  to  supply  the  place  of  money. 
Hence,  it  seems  preferable  to  seek  for  the  cause  of  the  vari- 
ations in  price,  during  the  great  war,  in  the  commodities  them- 
selves whose  price  was  afiected;  since  their  production  must 

cious  metals  was  interrupted  about  the  middle  of  the  eighteenth  century  by 
another  decline,  and  that  the  latter  yielded  to  a  subsequent  rise  in  1S15  and 
afterwards.  Thus  David  Hume^  History  of  England,  ch.  44,  App.  31,  ch.  49, 
App.  A.  Toung^  Political  Arithmetics,  ch.  6.  More  recently,  Rau^  Lehr- 
buch,  I,  §  176.  M.  Chevalier,  Cours,  III,  320  ff.  One  of  the  principal  advo- 
cates of  the  opinion  that  &\^rj  increase  made  in  the  medium  of  circulation 
produces  a  corresponding  depreciation  is  Nebenius,  Deutsche  Vierteljahrs- 
schrift  (1841).  In  England  a  quarter  of  Avheat  was  worth,  on  an  average, 
38s.  -|d.,  from  1595  to  1685.  On  a  similar  stability  of  corn  prices  in  Belgium, 
see  ScJnverz,  Belgische  Landwirthschaft,  III,  37.  According  to  Suckburg 
(1.  c),  the  value  in  exchange  of  money  from  1640  to  1700  declined  32-I  per 
cent.;  from  1700  to  1760,  43  per  cent;  from  1760  to  1806,  84  per  cent. 

^Frorn  1637  to  1700  the  price  of  corn  in  England  averaged  51  shillings; 
from  1701  to  1764  only  40^  shillings. 

'  Thus,  the  dearness  of  wheat  in  Germany,  during  the  first  thirty  years 
after  the  Thirty  Years'  War  was  caused,  in  large  part,  by  the  depopulation 
produced  by  the  War. 


ilG  CIRCULATION  OF  GOODS.  [B.  II,  Cii.  IV 

have  been  enormously  disturbed.  It  rendered  the  brawniest 
men  and  the  most  powerful  horses  unproductive,  and  even 
employed  them  as  agents  of  destruction.  It  interrupted  trade 
in  a  thousand  ways,  or  drove  it  into  unnatural  channels,  and 
turned  the  intellectual  interests  of  nations  into  every  direction 
save  that  of  economic  industry.  To  this  must  be  added  the 
absence  of  security  everywhere.^'' 

The  cessation  of  these  restrictions  upon  production,  in  con- 
sequence of  the  restoration  of  peace  throughout  the  world  and 
the  great  progress  afterwards  made  in  almost  all  branches  of 
industry,  explain  why,  from  1818  to  1848,  the  precious  metals 
have  apparently  stood  higher  than  during  the  period  immedi- 
ately preceding.^^  ^^ 


SECTION  CXXXVIII. 

REVOLUTION  IN  PRICES.  — INFLUENCE  OF  THE  NON-MON- 
ETARY USE  OF  GOLD  AND  SILVER. 

To  understand  why  so  great  an  increase  in  the  production 
of  the  precious  metals  produced  so  small  a  decline  of  their 
value  in  exchange,  we  must  turn  our  attention  to  the  other 
and  further  uses  of  gold  and  silver.  The  amount  devoted  to 
these  uses  can  never  be  very  accurately  determined,  since 

'"  In  Germany,  also,  the  cause  of  the  enhanced  dearness  of  so  many  goods 
during  the  Thirty  Years'  War  is  to  be  sought  for  in  the  goods  themselves. 

"  Since  1815,  most  Birmingham  and  Sheffield  wares  have  fallen  from  50  to 
70  or  80  per  cent,  in  price  —  at  least  from  20  to  30.  (McCulloc/t,  Statist.  Account, 
I,  705.)  The  Quarterly  Review,  May,  1830,  speaks  even  of  an  average  de- 
cline of  prices  of  English  commodities  in  general,  of  50  per  cent. 

'2  Excellently  carried  out  in  Tooke,  History  of  Prices,  III,  1838.  That  the 
world's  market  is  not  so  very  readily  affected  by  an  increase  of  the  medium 
of  circulation,  is  established  by  this  fact,  among  others,  that  the  immense  ex- 
portation of  French  metallic  money  in  consequence  of  the  issue  of  paper 
money  between  1716  and  1720,  and  again  in  1790  and  the  following  years,  is 
coincident  with  very  low  prices  of  wheat  in  the  neighboring  countries.  (Hel- 
ferich,  loc.  cit.,  139,  190  ff.)  And  yet,  in  the  former  case,  the  amount  was 
400,000,000  francs,  and  in  the  latter,  at  least  1,000,000. 


Sec.  CXXXVIII.]         REVOLUTION  IN  PRICES.  417 

governmental  stamping  of  every  new  gold  or  silver  article 
would  atlbrd  no  evidence  as  to  the  number  of  such  articles 
manufactured  out  of  old  articles  etc.  ^  Certain  it  is,  however, 
that  the  aggregate  amount  of  gold  and  silver  thus  employed, 
increases  with  the  increase  of  luxury  and  wealth  among  mod- 
em nations,  and  that  a  quantity  of  the  precious  metals  thus 
used,  especiall}^  when  used  for  purposes  of  gilding  for  instance, 
is  irrestorably  lost. '~     In  addition  to  this,  there  is  the  wear  and 

'  yacob  estimates  this  part  at  only  2^  per  cent.,  McCulloch^  at  20,  Lowe  at 
25,  Necker  and  Hdferich  at  50,  Humboldt  at  66^  of  the  whole  quantity 
worked.  It  certainly  is,  in  our  day,  on  account  of  the  ever  growing  aggre- 
gate supply,  greater  than  hitherto ;  but  it  is  very  different  in  different  coun- 
tries. Nebenius^  Deutsche  Vierteljahrsschrift,  1851,  56  seq.,  estimates  the 
aggi'egate  consumption  of  new  gold  and  silver  for  industrial  purposes  at  14^2 
piasters  yearly,  and  in  addition  to  this  seven  millions  of  old  gold  and  silver 
(Bruchgold  nnd  Bruchsilber).  The  annual  wear  and  tear  of  previously  ex- 
isting articles  of  gold  and  silver,  it  is  estimated,  amounts  to  4,420,000  piasters 
(^Itt)'  ^^^  annual  increase  of  their  aggregate  amounts  in  Europe  to  6,000,000 
piasters  (i_J^  per  cent.,  corresponding  to  the  increase  of  population),  and  4,- 
200,000  (one-fith  of  the  entire  consumption),  is  employed,  as  he  claims,  in 
gilding,  plating  etc.  The  last  item  is  probably  much  increased  by  galvanic 
silver-plating,  the  invention  of  photography  etc. 

2  Jacob  embraces  in  the  amount  of  metal  employed  in  industrial  purposes, 
in  the  sixteenth  and  seventeenth  centuries,  \  of  the  amount  which,  after  de- 
ducting the  loss  in  Asiastic  trade,  was  added  to  the  gold  and  silver  stores  of 
Eui-ope;  i.  e.,  in  the  seventeenth  century,  about  2,500,000  piasters  yearly;  in 
the  eighteenth  century,  %  (l);  that  is,  annually,  15,000,000  piasters;  in  1S30, 
in  England,  £2,457,221;  in  France,  120,000;  Switzerland,  350,000;  in  the  rest 
of  Europe,  1,605,490;  in  North  America,  about  300,000;  altogether,  £5,900,000. 
Humboldt's  estimate  is  2 1,000,000 piasters;  McCtdlock^s,  £6,0^0,000.  Accord- 
ing to  the  records  of  the  Paris  Monnate,  the  amount  of  silver  ware  in  France 
increased  seven  fold  between  1709  and  1759.  (Humboldt.)  In  England,  be- 
tween 1807  and  1S14,  8,290,000  ounces  of  silver  were  stamped  for  manufac- 
turing purposes:  from  1S30  to  1837,  only  7,387,000;  in  1851,  924,000.  AIc- 
Cullocli  estimates  the  annual  consumption  of  silver,  in  Birmingham  alone, 
lor  plating  purposes,  at  150,000  ounces;  in  Sheffield,  at  500,000;  and  the  gold 
consumption  in  the  pottery  districts  at  £650  per  week.  Birmingham  con- 
sumed (1831)  for  gilding  purposes,  £1,000  gold  yearly.  (Whatcly.)  It  now 
employs  weekly  3,000  ounces  of  gold  and  6,000  ounces  of  silver  in  the  man- 
ufacture of  gold  and  silver  ware,  besides  the  quantity  intended  for  gilding 
and  silver-washing  purposes.  (Quart.  Rev.,  April,  1S66,  3S1.)  The  jewelers 
of  New  York  manufacture  yearly  3,000,000  of  dollars  worth  of  gold  and 
Vol.  I. — 27 


418  CIRCULATION  OF  GOODS.  [B.  II,  Ch.  IV. 

tear  of  coin  in  circulation,  which  is  naturally  greater  in  the  case 
of  large  pieces  than  of  small,  and,  therefore,  in  the  case  of 
silver  than  of  gold.  There  is,  further,  the  damage  caused  by 
the  loss  of  coin  in  conflagrations  and  shipwrecks,  and  that 
occasioned  by  buried  and  forgotten  treasure.  ^ 

But,  lastly,  the  principal  cause  consists  in  the  powerful  in- 
crease of  the  demand  for  money,  which,  during  the  last  two 
centuries,  the  great  impulse  given  to  the  rapidity  of  circula- 
tion, and  the  great  increase  in  the  substitutes  for  money,  have 
scarcely  been  able  to  outweigh.     Besides  the  great  growth 

silver  ware,  mostly  new  material.  (Economist,  April  i6,  1853.)  There  were 
in  Vienna,  in  1781,  only  167  workers  in  gold  and  silver;  in  1840,  229;  in  1847, 
539.  (Baumga7-tner^  in  the  Wiener  Akademie,  May  3,  1S57.)  yacob  esti- 
mates the  aggregate  mass  of  gold  and  silver  ware,  in  plate,  instruments  etc., 
in  Europe  and  America,  to  be  ij^  as  great  as  that  of  the  ready  money;  and 
in  England  alone  to  be  twice  as  great  (ch.  28) ;  while  Tengoborski  thinks 
that  at  the  beginning  of  the  nineteenth  century,  the  coin  constituted  2^  of 
the  entire  amount  of  the  precious  metals.  Sometimes  a  movement  in  the 
opposite  direction  takes  place,  as,  for  instance,  in  those  revolutions  in  which 
the  silver  of  the  church  was  confiscated;  in  the  imfortunate  wars  of  Louis 
XIV.,  etc.  Nebmius,  loc.  cit.,  17,  mentions  a  South  German  silversmith 
who  melted  down  in  the  years  succeeding  1802,  monastery  silver  to  the 
amount  of  11,000,000  guldens. 

^  On  the  wear  and  tear  of  coin,  see  §  120,  and  Hermann^  in  the  Archiv.  der 
politischen  Oek.,  I,  1841.  Compare  also,  Faust,  Concilia  pro  Aerario,  1641, 
263  fF,  This  wear  and  tear  is  so  great  that  AI.  Chevalier  supposes  that  it 
alone  would  suffice  to  reduce  an  amount  of  money  under  Constantine  the 
Great  of  5,000  millions  to  300  millions,  in  the  time  of  Philip  IV.  (ob.  1314.) 
Cours,  II,  322.  How  great  a  number  of  coins,  especially  of  the  snxaller  de- 
nominations, are  entirely  lost  is  evident  from  the  fact,  that  at  the  time  of  the 
demonetization  of  the  15-sous  and  30-sous  pieces  of  1791-92,  amounting  to 
25,000,000,  only  16,000,000  were  presented  for  redemption.  Of  the  lo-centime 
pieces  stamped  with  an  N,  amounting  to  3,286,932  francs,  there  were  only 
2,000,000  left  when  they  were  withdrawn  from  circulation,  and  this  although 
individuals  had  added  to  the  coinage.  (M.  Chevalier,  III,  321.)  The  total 
loss  caused  on  this  score,  McCulloch  estimates  at  i  per  cent,  per  annum,  and 
Helferich,  at  ^  per  cent.  The  greater  the  aggregate  stock  of  gold  and  silver, 
the  greater  the  absolute  amount  of  wear  and  tear.  If,  therefore,  there  were 
annually  an  equal  influx  of  mineral  products  to  the  markets,  the  pressure  of 
this  increase  of  supply  from  that  cause  alone  would  take  the  shape  of  a  con- 
verging series  of  prices.     (Toohe,  History  of  Prices,  II,  151  ft") 


Sec.  CXXXVIIL]        REVOLUTION  IN  PRICES.  419 

of  population  and  of  wealth,  at  least  in  Europe  and  the  new 
world,  I  need  call  attention  only  to  the  immense  advance  made 
in  the  division  of  labor,  and  to  the  transition  from  trade  by 
barter  to  trade  through  the  instrumentality  of  money.  The 
entire  war  and  merchant  marine  of  England,  about  1602,  had, 
according  to  Anderson,  a  capacity  of  only  45,000  tons,  —  that 
is,  not  one-fifth  of  what  the  small  city  of  Bremen  has  now ;  a 
capacity  which  at  the  close  of  the  year  1873  amounted  to 
237,206  tons  —  while  in  1872  its  merchant  marine  alone  had 
a  capacity  of  7,213,000  tons.  The  aggregate  foreign  trade 
of  England,  France,  Russia  and  the  United  States,  in  1750, 
amounted  to  about  260,000,000  thalers;  in  1864,  it  was  over 
5,400,000,000,  and  between  1871  and  1872,  in  one  year, 
over  9,000,000,000  thalers.  Nor  should  it  be  forgotten  that 
Europe's  trade  with  the  East,  since  the  beginning  of  the  six- 
teenth century,  increased  immensely.  This,  at  present,  pro- 
duces uniformly  a  very  "  unfavorable  balance"  for  Europe, 
which  can  be  made  up  for  only  by  very  large  shipments  of 
silver  to  foreign  parts.*     If  China  and  India  were  suddenly  to 

*  The  British  East  India  Company  exported  gold  and  silver  on  an  average 
per  annum  from : 

171 1 — 1720,  ......      £434,000 

1 72 1— 1730, 532,000 

1731— 1740>  ......        487,000 

1741— 1750,        ......  631,000 

1751—1760,  ......        571,000 

1761 — 1770,        ......  152,000 

1771 — 1780,  ......  43,000 

1781— 1790, 393.000 

1791 — iSoo,  ......        352,000 

1801 — 1807,        .......  852,000 

Milhurn^  Oriental  Commerce,  1S13,  419.  According  to  M.  Chevalier^  In- 
troduction aux  Rapports  de  1' Exposition  de  1867,  the  trade  of  Europe  and 
North  America,  with  India,  China,  Japan  and  the  Australian  islands, 
amounted  in  1800,  to  only  410  million  francs,  in  1S66,  to  4,024  million.  Yet, 
for  a  time,  the  largely  increased  exportation  of  English  manufactures  to  East 
India  and  of  East  Indian  opium  to  China,  had  changed  the  relation  so  that 
the  exportation  of  the  precious  metals  from  South  Asia,  by  a  great  deal,  more 
than  counterbalanced  the  imports.     On  the  other  hand,  between  1853  and  1856, 


420  CIRCULATION  OF  GOODS.  [B.  II,  Ch.  IV. 

draw  on  us  for  other  commodities  instead  of  gold  and  silver, 
the  result  would  be  a  great  revolution  in  prices  in  Europe. 


SECTION  CXXXIX. 

HISTORY  OF    PRICES.  — CALIFORNI AN  AND  AUSTRALIAN 
DISCOVERIES. 

Tengoborski  is  of  opinion,  that  the  flow  of  gold  from  Sibe- 
ria alone  would  have  been  absorbed  by  the  ever-increasing 
want  of  civilized  nations  of  money;  but  that  the  coincident  dis- 
coveries in  California  and  Australia,  in  September  1847,  and 
February  185 1,  must  sooner  or  later  produce  a  revolution  in 
prices.  And,  indeed,  the  fecundity  of  these  countries  is  un- 
paralleled. North  America,  which  in  1846  produced  only 
3,600  pounds  of  gold,  according  to  Soetbeer,  produced  in  the 
years  from  1849  to  1863,  respectively,  118,000, 148,000, 178,000, 
195,000,  180,000,  165,000,  165,000,  165,000,  160,000,  145,000, 
125,000,  120,000,  115,000  and  110,000.  Austria  produced  in 
the  years  from  1851  to  1863  respectively,  27,000,  196,000, 
250,000,  160,000,  170,000,  195,000,  180,000, 175,000,  160,000, 
150,000,  160,000,  160,000,  170,000,  pounds  of  gold. 

Prom  1864  to  1867,  the  aggregate  production  of  gold  in  the 
world  was,  according  to  the  last  mentioned  authority,  a  yearly 
average  of  188.4  minions  of  thalers,  and  of  silver,  94,8  millions. 
In  Europe,  Russia  not  included,  the  production  was,  in  1863, 

240,ooo,cxx)  thalers  were  shipped  to  India  and  China  from  England  and  the 
Mediterranean  harbors ;  in  1863  and  1S64,  even  as  much  as  300  millions,  to 
be,  for  the  most  part,  buried  there.  Moreover,  the  immense  quantity  of  cash 
money  —  often  as  much  as  from  12  to  15  million  in  pounds  sterling — in  the 
state  ti-easury,  and  silver  ornaments  (§§  44,  123)  customary  in  India,  demand 
a  considerable  yearly  supply  to  make  up  for  wear.  Nexvmarch  speaks  of  400 
million  pounds  sterling  which  can  be  maintained  in  its  condition  hitherto  by 
a  yearly  increase  of  i  per  cent.  (History  of  Prices,  VI,  723.)  From  1865  to 
1869,  English  steamships  carried  gold  and  silver  to  the  East  in  the  following 
quantities,  yearly :  93.9,  66.3,  24.6,  70.2  and  60.4  million  thalers,  in  addition 
to  which  almost  as  much  came  directly  from  California.  Statist.  Journ., 
1871,  122  seq. 


Sec.  CXXXIX.]  HISTORY  OF  PRICES.  421 

3,960  pounds  of  gold  and  405,000  pounds  of  silver;  in  the 
Russian  Empire,  46,500 pounds  of  gold  and  40,000  of  silver;  in 
Mexico  12,000  pounds  of  gold  and  1,250,000  pounds  of  silver;  in 
South  and  Central  America,  12,500  pounds  of  gold  and  520,000 
pounds  of  silver;  in  Africa,  India  and  Lesser  Asia,  30,000 
pounds  of  gold  and  40,000  pounds  of  silver  —  a  total  of  384,000 
pounds  of  gold,  and  2,905,000  pounds  of  silver.  F.  X.  Neu- 
mann ^  "^  estimates  that  the  whole  world  produced,  in  the  years 

'  Tooke-Nezvinaixh,  History  of  Prices,  VI,  147  If.,  estimates  the  aggregate 
stock  of  gold  at  the  end  of  1S48  at  £5,600,000;  in  1856,  at  £172,000,000  more. 
According  to  Lavasseur^  the  amount  of  silver  in  the  East  increased,  between 
1848  and  1S57,  from  22  to  24  milliards  of  francs;  andthe  amount  of  gold  from 
9^  to  15^  milliards.  (Annuarie  d'Economie  politique,  1858,  632.)  The 
total  amount  of  gold  and  silver  in  the  civilized  world,  Wolovjski  estimated  at 
from  55  to  60  milliards  of  francs,  in  1S70.  (L'Or  et  I'Argent,  Enqugte,  19.) 
Compare  Mason^  The  Gold  Regions  of  California  from  the  Official  Reports, 
1848.  Teiigoborski^p-wx  les  Gites  auriferes  de  la  Californie  et  de  I'Australie, 
1S53.  Goldfield's  Statistics  issued  from  the  Mining  Department  in  Victoria, 
1S62.  W.  R.  Blake,  The  Production  of  the  precious  Metals,  or  statist  No- 
tice of  the  principal  Gold  and  Silver  producing  Regions  of  the  World  (New 
York,  1869). 

2  Soetbeer's  Denkschrift  betr.  die  deutsche  Munzeinigung  Mai,  1869,  aud 
earlier  yet,  in  FaucJier''s  Vierteljahrsschrift,  1865,  II,  According  to  M.  Che- 
valier, all  the  mines  of  the  world,  a  short  time  previous  to  1S65,  produced 
284,000  kilogrammes  of  gold,  and  190,000  kilogrammes  of  silver  in  a  year; 
a  total  of  373,000  thalers  (Journal  des  Economistes,  Jime,  1866),  while,  in 
1848,  the  total  amount  of  gold  coinage  in  the  world  was  estimated  at  560,- 
000,000;  Great  Britain,  France,  North  America  and  Sidney  had,  since  that 
time  and  up  to  1871,  added  to  this  £597,780,000.  The  additions  have  been 
made  in  decreasing  quantities:  thus,  1857-59,  37-2  millions  annually;  1869-71, 
16.99  millions  annually.  (Statist.  Journ.,  1872,  376  ff.)  The  estimates  as  to 
how  much  a  gold-digger  might  make  in  a  day  have  been  variously  estimated. 
Thus,  Larkin  estimates  it  from  $25  to  $50;  Mason,  at  $10;  Folson,  at  $25  to 
$40;  Butler  King,  at  $16,  reckoning  one  ounce  at  $16.  All  these  estimates 
seem  to  give  an  altogether  too  high  average.  In  Australia,  according  to 
Khull,  Colonial  Review,  June,  1853,  a  digger  can  produce  only  one  ounce 
daily,  or  less  than  4  thalers.  According  to  W.  Stamer^  Recollections  of  a 
Life  of  Adventure,  II,  1866,  a  gold-washer  in  Victoria  earned  in  1S58,  on  an 
average,  £250  per  year;  in  1865,  only  £70;  while  day  labor  was  worth  15 
shillings.  Hence,  great  hopes  have  to  be  built  on  the  lottery-nature  of  gold- 
washing.  On  the  Rhine,  a  gold-washer  is  satisfied  with  7^  of  a  gramme  of 
gold,  that  is  worth  from  13  to  18  silver  groschens.  (Dauhrie,  Comptes  rendus 
de  1'  Academic  des  Sciences,  XXII,  639.)     It  should  be  borne  in  mind,  how- 


422  CIRCULATION  OF  GOODS.  [B.  II,  Ch.  IV. 

1868-1870,  annually,  192.8  million  thalers  of  gold,  and  94  mil- 
lion thalers  of  silver;  and  in  1873,  ^f  both  metals,  291  million 
thalers. 

The  question,  whether  in  this  second  half  of  the  nineteenth 
century,  we  are  to  have  a  revolution  in  prices  similar  to  that 
which  took  place  in  the  sixteenth  century  can  be  ansv^^ered 
only  hypotheticaUy.  The  gold  diggings  now  most  productive 
will,  probably,  as  we  may  judge  from  analogous  cases  in  the 
past,  be  soon  exhausted.  ^     But  it  is  entirely  possible  that,  for 

ever,  that  the  Rhine-lander  devotes  to  gold-washing  only  the  leisure  time 
which  his  avocation  as  a-fisherman  leaves  him,  while  the  gold-washer  in  the 
new  world,  as  a  rule,  devotes  his  whole  time  to  it;  and  that  his  labors  are  in- 
terrupted by  tlie  long  rainy  season,  attacks  of  fever  etc.  To  this  must  be 
added  the  great  difference  of  the  average  prices  of  the  means  of  subsistence 
and  the  difference  of  all  social  conditions. 

3  Compare,  for  instance,  on  the  early  productiveness  of  the  Brazilian  gold 
districts  which  soon  ceased :  Sj>ix  iind  Martins^  Reise  nach  Brasilien,  I,  262  f., 
350.  Gardner^  Travels  in  the  Interior  of  Brazil,  1S46.  On  Hispaniola,  see 
Benzoin,  N.  Mundo,  I,  6i,  and  Peschel,  Gesch.  der  Entdeckungen,  304,  556. 
Hitherto,  gold  had  been  obtained  by  the  usual  mining  process,  only  in  very 
few  places.  As  a  rule,  it  has  been  found  in  alluvial  land  not  far  from  the 
surface.  Compare  Ansted,  The  Gold-Seekers'  Manual,  1849.  These  cir- 
cumstances have  made  the  production  of  gold  important  from  the  first;  and 
they  still  make  it  comparatively  easy,  while  it  causes  little  demand  for  capital 
but  for  great  skill.  As  soon,  therefore,  as  the  greater  part  of  the  country 
washed  for  gold  has  been  worked,  which  does  not  require  a  long  time,  the 
whole  is  abandoned,  while  in  the  production  of  silver  the  great  amount  of 
capital  fixed  in  pits,  shafts,  kilns  etc.  ties  the  parties  engaged  in  the  enterprise 
to  the  spot,  and  necessitates  the  continuation  of  the  enterprise.  In  recent 
times,  however,. Australia  and  California  have  developed  the  mining  and 
machine  production  of  gold  to  a  surprising  extent.  According  to  Laur,  La 
Production  des  Metaux  precieux  en  Californie,  1862,  33,  and  the  Journal  des 
Economistes,  Nov.  1862,  Californian  gold-quartz  produced,  in  1851,  on  an 
average,  635  francs  per  ton;  in  i860,  only  from  80  to  85  francs;  but  the 
gold- washing  methods  have  become  cheaper  in  the  ratio  of  2,500:  i.  How- 
ever, the  production  of  the  precious  metals  seems  even  now  to  be  decreasing 
According  to  the  Statist.  Journal,  1866,  99,  it  amounted  on  an  average  to 

Gold.  Silver. 

1849 — 51,  -  -  £23.9  million.     £15.5  million. 

18^2—56,        ...  -        38.7        "  16.1 

1S57— 59,  -  -  -  36-5        "  I7-I 

186(^63,       ....        33.5        "  18.2 

1864—68,  -  -  -  30.0        "  19.5        " 


Sec.  CXXXIX.]  HISTORY  OF  PRICES.  423 

a  long  series  of  years,  other  diggings  will  be  found  equally 
rich.  It  is  almost  certain  that  the  restless  activity  of  the  Eng- 
lish and  of  North  Americans  will  not  cease  until  they  have 
exhausted  the  favors  of  nature.  ^  Every  improvement  in  agri- 
culture, in  the  means  of  communication,  and  in  the  public  se- 
curity of  the  gold  lands,  makes  the  cost  of  production  smaller. 
There  are  doubtless  in  other  countries  a  great  many  placers 
which  need  only  to  be  touched  with,  the  linger  of  European 
civilization  to  produce  gold  in  abundance.  ^  It  would,  indeed, 
be  necessary  that  this  same  civilization  should  make  these 
same  countries  better  markets  for  the  precious  metals  by  in- 
creasing their  demand. 

The  number  of  gold-diggers  in  Victoria  steadily  decreased  from  125,764  in 
1S57,  to  63,053  in  1S67. 

*  One  of  the  chief  difficulties  in  the  way  of  the  production  of  gold  is  the 
loss  by  embezzlement,  which  is  estimated  at  an  average  of  20  per  cent. 
Small  companies  of  men  working  on  their  own  account  would  be  less  ex- 
posed to  temptation,  and  the  Anglo-Saxon  races  and  the  North  Americans 
are  very  well  adapted  thereto.     (M.  Chevalier^  III,  261.) 

5  Gold  is  in  a  certain  sense  one  of  the  most  widespread  of  metals,  although 
it  is  found  anywhere  only  in  small  quantities;  so  that  on  the  Rhine,  for  in- 
stance, it  takes  from  17  to  22  millions  of  gold  grains  to  make  a  kilogramme. 
An  extraordinarily  large  number  of  places  owe  their  civilization  to  gold- 
seekers.  Compare  Tacitus^  Agi'.,  12.  I  select  the  following  "  finds "  from 
Ritter's  Erdkunde.  The  Shangallas  (I,  249);  still  more  the  terrace  of  Faz- 
oglu  itself  (I,  253,  compare  Bruce^  Travels,  V,  316,  VI,  255,  342),  in  Monomo- 
tapa  (I,  140);  in  Manica,  west  from  Sofala  (I,  145),  especially  since  the  sup- 
pression of  the  slave  trade  (I,  305,  471);  in  Mandigo  land  (I,  360,  372);  on  the 
road  from  Gambia  to  Timbuctoo  (I,  457);  on  Lake  Mangara  (I,  493) ;  between 
Timbuctoo  and  Finnin  (I,  445);  in  Nubia  (I,  667,  seq.);  unused  silver  and 
quicksilver  mines  on  the  lower  Bagradas  (I,  493) ;  gold  wealth  at  Malacca, 
aurea  chersonesus  (V,  6  f,  27);  Tonkin,  Lao  and  Ava  (III,  926,  1,2 16,  IV,  I, 
213);  Assam  (IV,  294);  smaller  Thibet  (III,  657);  Kashmere  (III,  1,155);  on 
i:pper  Setledsch  (III,  654  ff.,  668);  in  the  mountainous  sources  of  the  Indus 
(III,  508,  529,  593,  60S);  on  the  Cabool  (VII,  23);  in  Peshaver  (VII,  223); 
Badakschan  (VTI,  795);  rich  silver  mines  abandoned  for  want  of  wood  near 
Herat  (VIII,  243);  in  Armenia  (X,  273).  It  is  said  that  in  southern  China 
there  are  great  treasures  of  the  precious  metals,  the  removal  of  which  has 
been  opposed  thus  far.  (IV,  756.)  Arabia's  richness  in  gold  mines,  spoken  of 
by  Diodor.^  II,  50,  III,  45,  and  Agatharch,  De  Mare  rubro,  60,  is  of  doubtful 
existence,  as  no  traces  of  them  are  to  be  found  in  the  country  to-day. 


4:24:  CIRCULATION  OF  GOODS.  [B.  II,  Ch.  IV. 

So  far  as  silver  is  concerned,  there  can  be  no  question  that 
America  possesses  mines  unlimited  in  extent,  and,  as  yet, 
almost  untouched.  "  The  time  will  come,"  says  Duport,^  "  a 
century  sooner  or  later,  when  the  production  of  silver  will 
have  no  other  limits  than  those  put  to  it  by  the  continual 
decline  in  the  price  of  silver."  There  seems,  also,  to  be  no 
lack  of  quicksilver,  especially  in  California;  and  the  cost  of 
its  production  hitherto  may  be  lessened  very  much  by  the 
labor  of  better  workmen,  machines  and  means  of  transporta- 
tion.''' All  this  supposes  great  progress  of  the  mining  countries 
in  civilization  in  general ;  and  yet,  thus  far,  Mexico's  republi- 
can independence  etc.,  as  compared  with  the  later  years  of  the 
Spanish  colonial  system  there,  is  a  great  retrogression.  The 
conquest  of  Spanish  America  by  the  United  States  would 
give  a  vast  impetus  to  economic   improvement;   and  here, 

On  the  other  hand,  on  both  shores  of  the  Pacific  Ocean,  the  portions  of  the 
earth  richest  in  volcanoes  seem  to  possess  almost  everywhere  quantities  of  gold 
equal  to  those  of  California  and  Victoria.  (Edinburgh  Revievv^,  Jan.,  1863, 
82  ff.)  What  an  amount  of  treasure  can  be  obtained  at  times  from  old  and 
long  since  forgotten  "iinds  "  is  proved  by  the  Altai  (that  is  gold  mountain), 
which  even  the  old  Tschudi  had  rummaged  (K.  Rittc}\  II);  and  where 
Herodotus'  (III,  16)  love  of  truth,  so  frequently  called  in  question,  has  re- 
cently been  so  brilliantly  vindicated.  Compare  v.  Ungern-Sternberg^  Gesch. 
des  Goldes,  1835.  A.  Erman,  Ueber  die  geographische  Verbreitung  des 
Goldes,  1835.  According  to  MurcJiison,  Siberia,  ch.  17,  gold  is  to  be  found 
only  "  in  crystalline  and  paleozoic  rocks,  or  in  the  drift  from  these  rocks, 
which  is  a  tertiary  accumulation  of  the  pliocene  age ;"  and  that  it  is  found  most 
abundantly  "  in  quartz-ore,  vein-stones  and  traverse  altered  Silurian  slates, 
chiefly  lower  Silurian,  frequently  near  their  junction  with  eruptive  rocks." 

^  Compare  Humboldt,  N.  Espagne,  IV,  147  ff. ;  St.  Clair  Duport,  Essai  sur 
la  Production  des  Metaux  precieux  en  Mexique,  1843;  M.  Chevalier,  Cours., 
Ill,  483  ff 

'  The  cost  of  a  kilogramme  of  silver,  expressed  in  terms  of  silver  itself, 
up  to  the  moment  that  it  is  shipped,  is  estimated  by  Diiport  as  follows:  salt 
and  magistral,  61  grainmes;  quicksilver,  112  grammes;  stamping  it,  171 
grammes ;  transformation  of  the  ore,  72  grammes ;  rent  and  superintendence, 
38;  duties  etc.,  145 ;  smelting,  transportation  and  shipping,  35.  There  remains 
as  profit  for  mining  it,  336  grammes.  As  to  how  the  production  of  Ameri- 
can silver  increases  and  runs  parallel  with  the  cheapness  of  quicksilver,  see 
Humboldt,  N.  Espagne,  IV,  91  ff. 


Sec.  CXXXIX.]  HISTORY  OF  PRICES.  425 

again,  the  increase  of  production  would  be  attended  by  an  in- 
creased demand. 

But  especially  must  the  demand  for  the  precious  metals, 
which  naturally  increases  with  the  wealth,  commerce  and  lux- 
ury of  nations,  constitute  a  decisive  element  in  answering  our 
question.  Nothing,  for  instance,  were  a  reduction  in  prices 
impending,  would  promote  it  so  much  as  a  series  of  devastat- 
ing wars  or  revolutions  in  Em-ope.  Moreover,  it  should  not 
be  forgotten,  that  the  money  market  is  now  almost  commen- 
surable with  the  world,  and  will  soon  embrace  it  within  its 
limits ;  and  that  market  embraces  not  only  the  precious  metals 
but  the  numberless  representatives  of  money  and  media  of 
credit.  The  basin,  therefore,  to  which  the  gold  and  silver 
streams  of  the  world  are  tributary  is  immeasurably  greater 
than  it  was  in  the  sixteenth  century ;  its  level  cannot  be  changed 
as  readily,  and  an  equal  addition  made  every  year  to  its  pre- 
vious contents  can  increase  it  only  by  a  small  amount.^  Nor 
could  a  considerable  decline  of  the  value  of  the  precious  met- 
als be  readily  produced  without  making  the  circulation  of 
money  slower,  and  the  employment  of  means  of  credit  rela- 
tively less  frequent,  in  consequence  of  which,  the  further  de- 
cline would,  to  a  certain,  extent,  be  arrested.*  In  the  case  of 
other  commodities  a  decline  of  prices  leads  only  probably  to 
an  absolutely  greater  demand ;  in  the  case  of  money,  it  leads 
to  a  demand  necessarily  greater.  That  the  money  market  in 
our  days  can  stand  pretty  rude  shocks  is  evident  from  the 
fact,  among  others,  that  the  price  of  gold  is  so  high  as  com- 
pared with  that  of  silver.^°  ^^ 

8  Wolotvski  calculates  that  the  absolutely  much  smaller  yearly  increment 
to  the  amount  of  the  precious  metals  in  the  sixteenth  century,  frequently  j'^, 
now  constitutes  only  -^^  of  the  greater  existing  amount.  (L'Or  et  I'Argent 
Enqu6te,  50.) 

8  In  the  United  States  the  stock  of  cash  money  in  1S20  was  estimated  at 
5.1  thalers  per  capita;  in  1849,  at  8.6  thalers;  in  1S54,  °'^  ^'^^  other  hand,  at 
13  thalers. 

">The  weight  of  the  mass  of  gold  introduced  into  Europe  annually  stood 
to  that  of  silver  in  the  ratio  of  i :  60-65,  i"  the   seventeenth  century ;  in  the 


426  CIRCULATION  OF  GOODS.  [B.  II,  Ch.  IV. 


SECTION  CXL. 

REVOLUTION  IN  PRICES.  — ITS  INFLUENCE  ON  THE  NA- 
TIONAL RESOURCES. 

The  ulterior  consequences  of  such  a  revolution  in  prices 
would  contribute  to  the  real  wealth  of  a  people  only  in  the 
sense  that  they  would  place  such  a  people  in  a  way,  with  less 
sacrifice,  to  employ  the  precious  metals  on  a  large  scale  in  min- 

first  hall  of  the  eighteenth  century,  in  that  of  1:30;  in  the  second  half,  in 
that  of  1 :  40;  and  yet  the  variations  in  price  were  not  in  the  least  parallel. 
According  to  Scetbeer  (Beitrage  und  Materialien  zur  Beurtheilung  von  Geld 
und  Bankfragen,  1855,  102  seq.),  the  average  silver-course  (stlbercurs)  of  gold 
had,  1852-54,  sunk  only  2.05  per  cent.,  as  compared  with  that  of  iSoo-40. 
And  yet  the  value  of  the  annual  production  of  gold  stood  to  the  annual  pro- 
duction of  silver,  in  the  beginning  of  the  nineteenth  century,  as  29  to  71 ;  in 
1846,  as  47  to  53;  in  1848-56,  as  3  to  i. 

"  While  the  public,  even  since  1850,  think  they  have  noticed  a  depreciation 
in  the  value  of  money,  there  are  a  great  many  learned  political  economists 
who  are  by  no  means  prepared  to  grant  it.  The  principal  advocates  of  this 
opinion  are  Tooke,  and  Nexvinarch,ir\  vol.  VI.  of  the  History  of  Prices  (1857). 
Also  Lavergne,  in  the  Journal  des  Economistes.  And  really  the  enhanced 
dearness  of  many  kinds  of  goods  up  to  1S57,  might  have  been  accounted  for 
by  causes  affecting  the  goods  themselves:  diminished  supply  by  reason  of 
bad  harvests,  commercial  gluts  etc.;  increased  demand  by  capitalization  on  a 
gigantic  scale,  speculation,  but  especially  by  the  elevation  of  the  lower 
classes  etc. 

The  London  Avholesale  prices  were  on  the  1st  day  of  January,  1869,  near- 
ly all  lower  by  10  per  cent,  than  on  the  ist  day  of  July,  1S57.  Only  in- 
digo, cotton  and  meat  had  risen.  (Hildeb rand's  Jahrb.,  1S70,  I,  328.)  In 
many  instances  the  enhanced  dearness  is  entirely  local,  by  reason  of  the 
greater  facilities  for  transportation  in  places  where  prices  were  already  high- 
er. But  as  new  truths  are  very  easily  exaggerated  by  their  discoverers, 
much  of  Tooke's  view  concerning  these  events  depends  upon  a  polemic  car- 
ried too  far  against  the  theory  of  the  balance  of  trade  which  was  customary 
in  the  so-called  currency  school.  Compare,  in  opposition  to  Tooke,  Lavas- 
sciir,  in  the  Journal  des  Economistes,  March,  1S38,  and  M.  Chevalier,  La 
Baisse  probable  de  I'Or,  1858.  Lavassetir,  from  the  difference  between  the 
official  and  real  custom-house  prices  in  France,  calculates  that  raw  materials 
in  1856  were  on  the  average  63  per  cent.,  and  in  1858,  20  per  cent,  higher  than 
in  1826;  and  that  manufactured  articles  were  in  1856,  just  as  high,  and  in 
1858,  6  per  cent,  lower  than  in  1856.     An  average  made  of  all  commodities 


Sec.  CXL.]  REVOLUTION  IN  PRICES.  427 

istering  to  the  luxuries  of  life.  This  small  ach'anlage  itself 
would  be  counterbalanced  by  the  depreciation  of  the  metallic 
stock,  and  especially  by  the  necessity  of  henceforth  devoting 
a  larger  quantity  of  gold  and  silver  to  the  purposes  of  circula- 
tion.^ But  such  a  revolution  would  produce  a  sudden  reverse 
in  the  distribution  of  a  nation's  wealth  amon<j[  its  constituent 
members.  All  those  who,  by  virtue  of  contracts  antecedently 
made,  have  payments  to  effect,  are  benefited  to  the  extent  of 
the  difference  between  the  old  and  the  actual  price,  while  those 
who  are  to  receive  such  payments  lose  to  the  same  extent.^ 
Therefore,  those  engaged  in  industrial  enterprises  improve 
their  condition,  because  they  immediately  increase  ^  the  prices 

showed,  in  1S56,  an  enhancement  of  30  per  cent,  and  in  1S5S  of  9  per  cent. 
(Hildebrand's  ]iihxh.,  1S64,  II,  iiS.) 

In  the  Hamburg  market  in  1847-65,  87  articles  declined  in  price,  183  rose 
in  price,  and  24  remained  about  stationary.  (Amtl.  Statistik  von  1887,  18  ft'.j 
ycvo7is  assumes  a  general  rise  in  the  price  of  commodities  betAveen  1849  and 
1869  of  about  iS  percent.  (Economist,  May  8,  1869.)  He  makes  this  esti- 
mate from  the  average  March  prices  of  50  of  the  principal  articles.  Assum- 
ing the  average  March  price  of  1849:=  100,  we  have,  according  to  him,  for 
the  following  years,  respectively:  101,  103,  loi,  116,  130,  125,  129,  132,  iiS, 
120,  124,  123,  124,  123,  122,  121,  128,  118,  120,  119.  Previous  years  showed: 
1789=133;  1799— .202;  i8o9=.245;  1819=175;  1829  =  124;  1829=144. 
(Compare  supra,  §  129,  note  i.)  The  budget  of  a  Swiss  teacher's  family  con- 
sisting of  five  persons  has  become  dearer  since  1840  ff.,  their  consumption 
remaining  the  same  and  of  only  the  simplest  articles,  by  72.5  per  cent.  (Boh- 
mert,Arbeiterervhaltnisse  etc.,  I,  302  ff.,  355.)  That,  however,  the  deprecia- 
tion is  under-estimated  most  precisely  in  England  and  over-estimated  in  Ger- 
many, Knies  very  well  accounts  for  by  the  price-leveling  effects  of  the  more 
modern  means  of  communication.     (Tiibinger  Zeitschr.,  185S,  280  ff.) 

'  Compare  Leibnitz^  on  the  consequences  which  would  follow  the  rcnlizatioa 
of  the  dreams  of  the  alchemists.  It  would  be  a  great  misfortune,  since  tlien  a 
pocket  would  no  longer  suffice  for  the  transportation  of  money,  and  people 
would  have  to  use  wheel-barrows  as  they  do  now  in  Sweden.  (Opcni  ed. 
Dutens,  V,  199,  401.) 

2  Bcccan'a  considers  it  equitable  that  the  debtor  should  always  pay  the  origi- 
nal value  of  the  metal.  (E.  P.,  IV,  2,  17.)  Galiant,  on  the  other  hand,  would 
not  permit  individuals,  even  when  the  state  arbitrarily  causes  a  diminution 
in  the  real  value  of  money  to  maintain  the  real  value  of  the  coinage  in  their 
contracts.     (Delia  Moneta,  V,  3.) 

'It  is  precisely  this  class  which  first  comes  to  an  understanding  of  the  es- 
sential nature  of  the  change  effected. 


428  CIRCULATION  OF  GOODS.  [B.  II,  Ch.  IV. 

of  their  own  productions ;  and,  for  a  time  at  least,  continue  the 
use  of  capital  borrowed  from  others,  of  land  leased  or  rented 
etc.  at  the  old  prices.* 

Besides,  at  the  beginning,  and  before  a  corresponding  de- 
preciation of  its  value  has  taken  place,  an  increase  of  money 
produces  as  a  rule  a  low  rate  of  interest  (§  185),  and  an  itch  to 
buy  on  the  part  of  the  public.  All  this  may  serve  as  a  pow- 
erful stimulant  to  production  on  a  large  scale.^  Those  most 
certain  to  sutler  loss  are  officials  ^  with  a  fixed  salary,  and  so- 
called  annuitants,  creditors  of  the  nation  and  of  individuals. 
Even  bankers,  too,  have  no  means  to  fix  the  value  of  their  wares 
which  they  see  disappearing,  so  to  speak  under  their  eyes.' 
Of  land  owners,  those  who  are  in  debt  gain,  that  is  especially 
the  poorer,  and  the  more  speculative  among  them.®     On  the 

*  Thus  the  EngHsh  lessees,  who  in  the  sixteenth  century  had  leases  for 
a  long  term  of  years,  saw  themselves  rise  in  the  social  scale  in  consequence 
of  the  revolutions  in  price  —  a  fact  of  importance  in  the  political  struggles 
of  the  seventeenth  century.  Compare  Sir  F.  M.  Eden^  State  of  the  Poor, 
I,  119  ff. 

*  Too  much  stress  is  laid  upon  this  by  Tooke-Ncivmaixk,  who,  on  that  ac- 
count, considers  almost  every  increase  of  the  precious  inetals  as  a  blessing. 
As  a  matter  of  fact,  the  population  of  Australia,  of  the  United  Kingdom, 
and  of  the  United  States,  increased,  between  1848  and  1871,  44.5  per  cent.; 
the  production  of  coal  and  of  railroads  in  England,  between  1856  and  1869, 
by  about  60.6  per  cent.;  the  English  production  of  woolen  goods,  linen  and 
cotton  and  yarn,  between  184S  and  1870,  by  from  no  to  335  per  cent. 
(Statist.  Journal,  1S72,  376  ff.) 

^  Luther^  s  complaint  concerning  the  poor  condition  of  the  clergy.  See 
Scl/mollei',  in  theTiibinger  Ztschr.,  i860.  This  very  clearly  shows  how  much 
surer  for  the  crown  domains  are  than  a  civil  list,  and  donations  of  land  to  a 
church  than  payments  in  money.  Law  of  Elizabeth,  18  Eliz.,  that,  in  the 
case  of  university  property,  ^  of  the  lease  rent  should  be  paid  in  metal  and 
y^  in  corn.  In  Adam  Smii/i's  time,  this  latter  third  was  worth  as  much  again 
as  the  other  two.     (I,  ch.  5.) 

■>  In  the  sixteenth  century,  this  class  was  of  small  importance  in  most  coun- 
tries ;  in  our  times,  their  ruin  would  cause  general  disturbance.  The  wiser 
class  of  capitalists  would,  indeed,  find  means  to  exchange  their  credits  for 
more  certain  values,  or  make  it  a  condition  that  they  should  receive  in  the 
end  a  large  sum. 

^Thus,  for  instance,  the  son  of  a  deceased  land  owner  who  retains  the 
lands  as  his  own  acquits  himself  towards  his  brothers  who  have  entered  the 


Sec.  CXL.]  REVOLUTION  IN  PRICES.  420 

Other  hand,  owners  of  large  estates  who  have  alienated  their 
tithe-rights,  or  right  to  vassal-service  etc.  for  capital,  or  for 
fixed  sums  to  be  paid  at  regular  intervals,  that  is,  in  a  great 
many  places  the  great  mass  of  the  nobilit}'',  undergo  a  not 
insignificant  social  fall. 

The  condition  of  those  who  earned  a  living  by  manual  labor 
no  doubt  deteriorated  in  the  sixteenth  centur}',  as  ma}'^  be  in- 
ferred from  the  extraordinary  activity  of  public  charity  in 
that  period. 

Between  1500  and  1550,  silver  purchased,  in  Orleans,  from 
4.1  to  4.5  times  as  much  common  labor  as  it  does  now,  while 
silver,  as  compared  with  the  average  price  of  twenty-seven 
commodities,  has  grown  cheaper  in  the  ratio  of  only  from  2.6 
to  2.7:1.  (Mantellier.)  It  was  impossible  for  this  class  to 
raise  the  price  of  their  wares  as  rapidly  as  that  of  the  medium 
of  circulation  declined,  because  they  could  not  wait,  nor  hold 
back  their  commodity  even  for  a  moment.  (§  164.)  ^  This 
would,  indeed,  be  very  difTerent  in  our  day.  Wages,  because 
of  the  facilities,  both  physical  and  moral,  which  have  every- 
where been  placed  in  the  wa}-  of  emigration,  were  necessarily 
one  of  these  articles  which  rose  soonest  in  price,  as  compared 
with  money.^°     Lastly,  the  state  itself  profits  by  the  diminished 

military  or  civil  service  of  their  country  by  paying  them  a  certain  sum  peri- 
odically. If  a  revolntion  were  really  impending,  the  owners  of  land  would 
soon  emulate  one  another  to  improve  their  estates  by  borrowing  capital,  if 
for  no  other  reason,  to  turn  the  depreciation  of  the  medium  of  circulation  to 
their  own  advantge.  In  the  sixteenth  century,  the  indebtedness  of  land 
owners  was  relatively  unimportant. 

9  It  appears  from  Roger's  Tables,  Statist.  Journal,  1861,  551  ft",  that,  between 
15S3  and  1620,  a  time  during  which  the  population  of  England  increased 
neither  in  wealth  nor  in  numbers,  there  was  a  considerable  increase  in  the 
price  of  nearly  all  English  commodities.  Thus,  for  instance,  wheat  was, 
from  1591  to  1600,  468  per  cent.,  and  from  1611  to  1620,  even  495  per  cent, 
higher  than  from  1530  to  1533.  The  Saxon  laborer  earned,  in  1599,  in  corn, 
only  half  as  much  as  in  1455.     (Tiibinger  Ztschr.,  1871,  354.) 

">  When  labor  is  indispensable  to  employers,  it  may  happen  that  a  small 
decline  in  the  supply  may  largely  raise  the  price.  Wages,  in  almost  all 
branches  of  labor,  rose  between  1851  and  1856,  by  about  from  15  to  20  per 
cent. 


430  CIRCULATION  OF  GOODS.  [B.  II,  Ch.  IV. 

thing-value,  that  is,  real  value  of  its  public  debt ;  ^^  but  it  loses, 
at  the  same  time,  on  all  taxes,  duties  etc.,  which  are  not  esti- 
mated at  a  certain  percentage  of  the  value  of  the  articles 
taxed.'^^  As  a  rule,  therefore,  it  would  need  to  impose  new 
taxes.  Now,  the  parliamentary  right  to  impose  taxes,  how- 
ever extensive  it  may  juridically  be,  is,  ordinarily,  of  great 
importance  in  practice  only  when  there  is  question  of  increas- 
ing the  existing  burthen.  Hence,  this  right,  wherever  it  ex- 
ists, is  brought  into  the  utmost  activity  by  a  revolution  in 
prices.-*^  ^* 

However,  the  new  additions  of  gold  and  silver  to  the  already 
existing  supply  may  not  immediately  produce  a  correspond- 
ing depreciation  of  the  value  of  the  precious  metals.  If  the 
first  receivers  of  the  additional  supply  of  money  exchange  it 
rapidly  for  other  goods,  it  will  probably  bring  them  the  former 
value  in  exchange  of  the  metal.  Not  until  it  has  passed  into 
a  third  or  fourth  person's  hands  is  the  depreciation  apt  to  be 
perceptible.  It  is,  therefore,  in  this  case,  a  great  advantage  to 
be  the  first  hand.  The  world-threatening  power  of  Spain,  in 
the  seventeenth  century,  was  very  essentially  promoted  by  the 
American  gold  and  silver  mines ;  ^^  nor  is  it  a  matter  of  less 

"  This,  also,  was  of  little  significance  in  the  sixteenth  century,  but  how 
important  now ! 

J^  Income  taxes,  ad  valorem  duties  and  tithes  rise  and  fall  in  their  nominal 
amount  as  the  price  of  the  medium  of  circulation  falls  and  rises. 

13  Thus,  for  instance,  the  victory  of  the  English  Parliament  over  the  un- 
limited power  of  the  crown,  in  the  first  half  of  the  seventeenth  century,  was 
very  much  promoted  by  the  fact  that  the  crown,  in  spite  of  all  its  economy, 
was  always  in  financial  straits  in  consequence  of  the  depreciation  of  money. 
(Power  of  the  purse,  power  of  the  sword!)  However,  any  force  kept  stead- 
ily in  action  is  a  two-edged  sword.  While  under  favorable  circumstances,  it 
may  be  thereby  developed,  under  unfavorable  circumstances  it  may  be 
thereby  exhausted.  How  great  a  number  of  representative  assemblies,  during 
the  revolutions  in  prices  in  the  sixteenth  and  seventeenth  centuries,  allowed 
their  energies  to  grow  dormant! 

'^  Most  of  the  above  points  are  very  well  discussed  in  the  work  W.  S.,  cited 
above,  §  137. 

'*  As  no  one  then  doubted :  Compare  TV.  Raleigh^  The  Discovery  of 
Guiana,  Pref.    I  refer  to  Philip  of  Macedon, 


Sec.  CXLI.J  EFP^ECT  OF  ENHANCEMENT.  431 

significance  to-da}-,  lliat  the  great  mineral  wealth  of  the  world 
belongs  to  Siberia,  California  and  Australia ;  that  is,  especially 
to  Russia  and  to  countries  colonized  by  Great  Britain.  Fur- 
ther, as  to  the  classes  into  which  a  nation  is  divided,  it  was 
only  the  crown,  the  Church  and  a  compartively  small  number 
of  officials,  soldiers  and  officers  who  controlled  Spanish  Amer- 
ica ;^^  and  who  can  tell  how  the  absolute  monarchy  of  Spain 
was  strengthened  by  this  fact?  In  the  seventeenth  century, 
on  the  other  hand,  it  is  principally  manufacturers  and  mer- 
chants, and  more  especially  yet,  workmen,  w^ho  reap  the  im- 
mediate advantages  of  new  discoveries  of  gold. 


SECTION   CXLI. 

EFFECT   OF   AN    ENHANCEMENT    OF  THE    PRICE    OF    THE 
PRECIOUS  METALS. 

A  great  enhancement  of  the  precious  metals  would  naturally 
and  necessarily  produce  a  revolution  in  prices  in  a  direction  ^ 
opposite  to  the  one  just  described,  and  one  which  would  be 
much  more  injurious  to  a  nation's  economy.  Such  a  revolu- 
tion would  weigh  most  heavily  on  the  most  sensitive,  and  the 
momentarily  most  productive  classes  of  the  people,  inasmuch 
as  the  price  of  the  ready  product  as  compared  with  advances 
made  for  the  purposes  of  production  would  be  a  declining  one ; 
and  it  would  benefit  those  classes  who  live  in  leisure  on  the 
fruits  of  previous  labor.  There  would,  at  the  same  time,  be 
a  perceptible  growth  of  consumption  in  certain  departments, 
useful,  no  doubt,  in  themselves,  but  apt  to  degenerate  into  ex- 
cess, and  which  are,  therefore,  most  easily  cared  for.  (§212,  seq.) 

'*  Compare  liosc/icy,  Kolonien,  Kolonialpolitik  unci  Auswanderung,  1S56, 
145  ff. 

'  Something  similar  inight  have  been  observed  in  England  in  1S19  etc.,  at 
the  restoration  of  a  depreciated  paper  currency.  Among  nations  in  a  com- 
paratively low  stage  of  civilization,  a  variation  in  the  medium  of  circulation 
is  of  less  importance  than  among  more  highly  civilized  nations,  because 
trade  in  money,  and  still  more,  credit,  are  relatively  speaking  undeveloped. 


433  CIRCULATION  OF  GOODS.  [B.  II,  Cii.  IV. 

To  this  extent,  the  gold  discoveries  of  the  nineteenth  century, 
without  which  an  enhancement  of  the  price  of  money  would 
undoubtedly  have  taken  place,  have  warded  off  a  great  eco- 
nomic malady  from  the  nations.  Moreover,  this  inverted  rev- 
olution in  prices  may  be  moderated  by  governmental  measures, 
such  as  a  diminution  of  taxes,  emissions  of  paper  money  etc.^ 

SECTION  CXLII. 

THE  PRICE  OF  GOLD  AS   COMPARED    WITH  THAT  OF  SIL- 
VER. 

The  price  of  gold  as  compared  with  that  of  silver  does  not, 
by  any  means,  depend  entirely  on  the  ratio  of  the  quantities  of 
the  two  to  each  other.  Rather  is  it,  in  the  long  run,  deter- 
mined by  the  average  cost  of  production  necessary  at  those 
gold  and  silver  mines  which  exist  under  the  most  disadvanta- 
geous conditions,  but  which  it  is  still  necessary  to  work  in 
order  to  satisfy  the  aggregate  requirement  of  these  metals. 
On  the  whole,  with  an  advance  of  economic  civilization,  the 
dearness  of  gold  as  compared  with  that  of  silver  has  been  en- 
hanced. The  former,  in  the  middle  ages,  was  worth  from 
ten  to  twelve  times  as  much  as  the  latter,^  while  now  it  is 

'  Fatvcett  greatly  exaggerates  when  he  says  that  with  an  increase  of  popu- 
lation and  wealth,  an  increase  of  money  is  as  much  a  want  as  hunger.  (Man- 
ual, 370.) 

^  Galiatn,  Delia  Moneta,  III,  i.  At  the  time  of  the  Lex  Salica,  10:  i. 
After  the  Edictum  Pistense  of  Charles  II.,  ch.  24  (Pertz,  Mon.  Germ.,  Ill, 
488),  12: 1.  At  the  time  of  the  Sachsenspiegel  (III,  45),  again,  10:  i.  Under 
Saint  Louis,  king  of  France,  12.5:  i.  (Leblanc,  Traite  historique  des  Mon- 
naies  de  la  France,  ch.  i,  2.)  In  Poland,  1356,  12:  i.  (Muraion,  Dissertt. 
Medii  Aevi,  II,  28.)  In  England,  1262,  9.6;  1272  =  12.5;  1345  =  13.7:1. 
(Rogers,  i,  593  fF.)  Under  Henry  VI.,  and  in  1494=12:1.  (A7iderson, 
Origin  of  Commerce,  a.  1422,  1494.)  In  Denmark,  under  the  former  Kings 
of  the  Union  =  8:  I.  ('Z)rt///;«««72,  Danische  Geschischte,  III,  52.)  And  so 
throughout  almost  the  whole  of  Scandinavia's  medieval  period,  as  for  instance 
in  the  Graugans.  (Wilda,  Gesch.  des  deutschen  Strafrechts,  I,  329.)  In 
Italy,  1579=  12: 1.  (Scan/ffi,  Sopra  le  Moneta,  1582.)  In  Holland,  1589  = 
11.6:1.    Bodinus,  De  Republ.,  1584,  II,  3,  maintains   12:1  as  the  general 


Sec.  CXLII.]         RATIO  OF  GOLD  TO  SILVER.  433 

worth  from  fifteen  to  almost  sixteen  times  as  much.^  In  the 
same  period  of  time,  also,  gold  in  highly  civilized  countries 
is  wont  to  be  comparatively  dearer.^ 

These  facts  are  explained  as  well  by  the  demand  as  by  the 
supply.  As  the  production  of  gold  requires  so  little  skill  or 
c;apital,  and  that  of  silver  so  much  of  both,  the  former  may  be 
considered  a  natural  product  to  a  greater  extent  than  the  latter, 
and  therefore,  the  rule  laid  down  in  §130  is  applicable  to  it. 
{Senior.)  Besides,  in  the  higher  stages  of  civilization,  espe- 
cially when  the  precious  metals  are  cheap,  larger  payments 
are  usual,  to  the  making  of  which,  gold  is  certainly  best 
adapted;  just  as  in  every  day  trade  merchants  are  wont  to 
accept  a  gold  piece  in  payment,  even  at  something  of  a  premi- 
um, while  the  peasantry  hesitate  to  do  so.'* 

ratio;  but  the  Apostolic  Chamber  adopted  the  ratio  of  12.8:  i.  In  Germany, 
according  to  the  instances  cited  \iy  A.  Riesc^  1522 r=  10:1.  The  monetary 
laws  of  Germany  give  it  in  1524:^=11^:1,  in  1551  =:ii :  i,  i559=ii|:i; 
Biidelius,  De  Monetis,  1591  =  11^:  i.  At  the  beginning  of  the  seventeenth 
century  the  relation  in  Spain  was  =  13.3;  in  Germany  =  12.16;  in  Flanders  =: 
13.22;  in  England  =  13.5:  I.  (Forboniiats,  Finances  de  la  France,  I,  52.) 
About  1641,  in  Flanders,  it  was  12.5;  in  France,  13.5;  in  Spain,  14.1.  Imme- 
diately after  Colbert's  death  it  -was,  in  Genoa,  15.03;  in  Milan  =  14.75:  i. 
(Montaiiari,  Delia  Moneta,  80.)  While  in  the  seventeenth  century  gold  rose, 
it  sank  in  the  eighteenth,  on  account  of  the  Brazilian  gold  washings  and  the 
many  bank  notes  in  circulation,  which  were  for  the  most  part  of  a  large  de- 
nomination. (Stcuari,  Principles,  III,  ch.  13.)  Still  it  was  in  Amsterdam 
in  1751=14.5:  I. 

-  In  Hamburg,  the  relation  of  the  price  of  gold  to  that  of  silver  bars,  var- 
ied, between  1816  and  1852,  from  between  15.11-16.2  to  i  (Soetbeer) ;  in 
London,  from  i8i6  to  1837,  between  15.80  and  14.97  to  i. 

^In  Asia,  it  is  generally  lower  than  in  Europe — for  centuries  mostly 
=  10:  I.  But  in  Birmah  it  is  =  17:  i,  mostly  on  account  of  the  extent  to 
which  indulgence  in  luxury  is  carried  there.  (Cravjfurd,  Embassy,  433. 
Hitter,  Erdkunde,  V,  244,  266.)  Concerning  China,  see  M.  Chevalier,  Cours, 
III,  359.  In  Africa,  gold  is  low  as  compared  with  silver,  in  proportion  to 
the  distance  from  the  civilized  world.  Thus,  an  ounce  of  gold  in  Shenaar 
cost  12  piastres;  in  Suakim,  20;  in  Djidda,  22.  (Ritter,  Erdkunde,  I,  538.)  In 
Timbuctoo,  Mungo  Park  found  the  relation  of  gold  to  silver  to  be  as  1%:  i. 
Compare  Marco  Polo,  II,  39  seq. 

*  In  antiquity,  a  similar  course  is  to  be  observed.     According  to  Menu's 
Indian  laws,  VIII,  134  seq.,  —lYz'- 1;  in  the  East,  for  a  long  time,  =10:  i; 
Vol.  I.— 28 


43J:  CIRCULATION  OF  GOODS.  [B.  II,  Ch.  IV 

It  is  very  much  of  a  question  whether  gold  or  silver  is,  on 
the  whole,  subject  to  greater  variations  in  price.  The  fact 
that  gold  is  more  strictly  a  natural  product  would  of  itself 
constitute  a  powerful  element  of  variation.  (§  112).  But,  on 
the  other  hand,  its  greater  durability  and  the  greater  care  be- 
stowed on  its  preservation,  have  for  eflect  to  make  the  exist- 
ing quantity  preponderate  in  importance  over  its  annual  in- 
crease. The  demand  for  gold  varies  more  suddenly  than 
the  demand  for  silver.  In  case  of  war  or  sedition,  the  former 
is  more  easily  carried  away  or  hidden.  It  is  also  more  desir- 
able for  the  state  for  its  military  fund.  On  the  other  hand,  on 
account  of  its  greater  capacity  for  transportation,  it  may  fol- 
low such  claims  when  made  on  it,  more  easily,  from  country 
to  country.  On  the  whole,  I  am  inclined  to  think  that,  for 
short  periods  of  time,  silver  maintains  its  value  better,  and 
gold  for  longer  ones.^ 

under  Darius  Hystaspis,  =13:  i.  (Herodot.,  Ill,  95.)  In  Greece,  in  the  time 
of  Lysias,  =10:  i  (Lystas,  pro  bonis  Arist.,  Conon);  according  to  Plato, 
=  12:  I  (Hipparcli.^  231):  according  to  Demosthenes^  adv.  Phorm.,  214,  =14:  i 
(Bockh,  Staatst.,  I,  43);  Menander's  estimate,  =10:  i,  probably  because  Alex- 
ander's victory  had  made  gold  cheaper.  (Pollux^  IX,  76.)  Among  the  Ro- 
mans, about  189  B.  C,  =10:1  (Livy,  XXXVIII,  11);  somewhat  later, 
r=ii.t;:  I  (Mommsen,  in  the  histor.  phil.  Berichten  der  K.  Sachs.  Gesellschaft, 
1S51,  184  ff.);  in  the  fourth  century  after  Christ,  =14:  i.  (Tkeod.,  Cod.  VIII, 
4,  27.)  We  sometimes  find  sudden  variations.  Thus,  according  to  Polyb., 
XXXIV,  10,  gold,  in  Italy,  sank  about  ^  in  consequence  of  the  opening  of 
the  mines  at  Aquilea.  It  sank  to  the  proportion  of  9:  i  when  Ctesar  spent 
the  contents  of  the  Roman  treasure,  which  consisted  of  gold.  (Sueron., 
Cses.,  54.)  The  ratio  of  17 :  i,  during  Hannibal's  wars,  was  a  species  of  Na- 
tional bankruptcy.     See  Plitt.,  H.  N.,  XXXIII,  B. 

^  After  the  February  revolution,  the  gold-agio,  as  compared  with  silver, 
rose  from  10-17  to  70  per  1,000.  (M.  Chevalier  Cours,  III,  346.)  On  the 
other  hand,  since  the  discovery  of  America,  gold,  as  compared  with  com- 
modities, has  declined  much  less  than  silver.  Compare  Hermann,  Ueber  den 
gegenwartigen  Zustand  des  Miinzwesens,  in  Rail's  Archiv.,  I,  151  ff.  Ac- 
cording to  Lord  Liverpool,  Treatise  on  the  Coins  of  the  Realm,  the  value  of 
gold  coin  in  the  London  market,  as  compared  Avith  bank  notes,  varied  in  40 
years, almost  5^  per  cent. 


Sec.  CXLIIL]         RATIO  OF  GOLD  TO  SILVER.  435 


SECTION  CXLIIL 

THE  PRICE   OF   GOLD   AS   COMPARED   WITH   THAT   OF 

SILVER. 

[CONTINUED.] 

If  the  gold-production  of  California  should  be  attended^  by 
a  notable  depression  of  the  value  of  that  metal,  it  becomes  a 
question  whether  or  not  silver  would  be  necessarily  depreci- 
ated with  it.  Senior  claims  that  it  would  not,  for  the  reason 
that  the  two  precious  metals  do  not,  for  most  purposes,  act  as 
substitutes  each  of  the  other.  If  a  country  needed  1,000 
pounds  of  gold  and  15,000  pounds  of  silver  as  money ,^  and  these 
two  sums  of  metal  were  equal  in  value,  an  increase  of  gold  by 
one-half,  which  would  depreciate  its  price  in  relation  to  silver 
to  10: 1,  would  not  overflow  the  channels  of  circulation.  The 
1,500  pounds  of  gold  are  now  also  equal  to  only  15,000  pounds 
of  silver,  and  vice  versa. 

I  would  put  very  important  limitations  to  this  assertion. 
Even  a  moderate  depreciation  of  gold  would  drive  out  the 
silver  from  all  those  countries  which  had  a  mixed  coinage 
made  up  of  the  two  metals;  and  hence  the  supply  of  silver 
w'ould  be  increased  in  the  other  countries.  And  so  it  is  quite 
possible,  up  to  a  certain  point,  that  the  larger  silver  coin  should 
be  replaced  by  small  gold  ones,  ten  and  five  franc  pieces  etc. 
Rau  is  certainly  right  in  his  surmise  that  a  general  rise  in  the 
price  of  commodities  as  compared  with  coin,  the  result  of  a 
great  increase  of  gold,  would  go  farthest  in  countries  in  which 
the  gold  is  the  medium  of  circulation,  begin  later  in  those 

1  In  recent  times,  it  has  become  possible  to  exti-act  from  ancient  silver 
coins  a  small  quantity  of  gold,  and  with  some  advantage.  European  indus- 
try produced  in  this  way  about  1,600  kilogrammes  of  gold  per  annum.  One 
half  of  this  amount  is  obtained  in  France  and  the  rest  in  Hamburg,  Amster- 
dam, Brussels  and  St.  Petersburg.     (Michel  Chevalier^  Cours,  III,  302.) 

^Senior,  On  the  Value  of  Money,  77  ff.  It  is  certain  that  a  simple  varia- 
tion in  prices  would  not  induce  people  to  have  gold  table  services,  or  archi- 
tectural ornaments  of  silver. 


436  CIRCULATION  OF  GOODS.  [B.  II,  Ch  IV, 

which  had  a  mixed  circulation,  and  continue  for  the  the  short- 
est time  in  those  countries  which,  by  force  of  law,  had  a 
silver  circulation  only.^  * 

*  Rau,  Lehrbuch,  6th  ed.,  I,  §  277  c.  In  Rau's  opinion  (loc.  cit.)  we  maj, 
in  the  course  of  the  next  decades,  expect  a  decline  of  the  price  of  gold  of 
about  76  per  cent.,  and  of  only  10  per  cent,  of  the  price  of  silver  (because  of 
the  low  prices  of  quicksilver.)  But  here  he  seems  to  overlook  entirely  what 
influence  a  change  of  standard  in  important  commercial  districts  would  have. 

•*  Compare  the  works  already  mentioned.  Flectvjood,  Chronicon  precio- 
sum,  or  an  Account  of  English  Gold  and  Silver  Money,  the  Price  of  Corn 
and  other  Commodities  etc.,  for  Six  Hundred  Years  last  past,  1707;  Diiprd 
de  Saint  Maur,  Essai  sur  les  Monnaies  ou  Reflexions  sur  les  Rapports  entre 
les  Denrees  et  I'Argent,  1746;  linger^  Ordnung  der  Fruchtpreise,  1752; 
Paucton^  Metrologie  ou  Traite  des  Mesures  etc.,  des  anciens  Peuples  et  les 
modernes,  17S0;  the  appendix  to  Macfherson''s  Annals  of  Commerce,  1805; 
the  tables  in  Gamier' s  translation  of  Adam  Smith,  vol.  II,  1822;  A.  Toung, 
Inquiry  into  the  progressive  Value  of  Money  in  England,  as  marked  by  the 
Price  of  Agricultural  Products,  1812;  W.  F.  Lloyd,  Prices  of  Corn  in  Ox- 
ford, in  the  Beginning  of  the  fourteenth  Century,  and  also  from  1583  to  the 
present  Time,  1830;  Hclferick,  in  the  TiJb.  Zeitschrift,  1858,471  ff.  There  are 
some  very  interesting  notes  on  the  history  of  prices  during  the  Merovingian 
and  Carolingian  periods  in  GiUrard,  Polyptiques,  I,  141  ff. 


APPENDIX  T. 


PAPER   MONEY. 


PAPER  mmj: 


SECTION  I. 

PAPER  MONEY  AND  MONEY-PAPER. 

Paper  money  must  be  distinguished  from  other  value-paper 
or  money-paper,^  which  may  also  run  to  the  possessor  or 
holder,  and  not  unfrequently  serve  as  a  medium  of  payment. 
In  the  case  of  these  bonds  or  obligations,^  their  circulating 
capacity  is  a  secondary  matter,  and  the  principal  thing  the 
authentication  of  an  economic  legal  relation;  whereas  paper 
money  is  intended  principally,  if  not  exclusively,  to  act  as 
m.oney.  ^  Money-paper  appears  in  a  great  many  different 
forms,  but  it  nearly  always  bears  interest.  Its  value  depends 
in  great  part  on  the  rate  and  certainty  of  its  interest.     On  the 

*  Furnished  by  the  author  expressly  for  this  edition. 

'  Thus,  for  instance,  the  bonds  (and  their  coupons)  of  states,  cities,  great 
corporations,  certificates  of  stock,  mortgages,  bills  of  exchange,  checks. 

-A  Prussian  regulation  of  1765  (Goldschmidt,  Handbuch  des  Handels- 
rechts,  I,  550),  calls  money-paper  (Effeden)^  instruments  of  trade  in  which 
a  value  or  a  valuta  is  designated. 

3  Garnier,  French  translation  of  Adam  Smith,  II,  143  ft'.,  distinguishes  be- 
tween coin-paper  and  promise-paper:  the  latter  is  never  found  in  circulation 
at  the  same  time  with  the  capital  which  it  represents.  Say  says  that,  for  in- 
stance, evidences  of  state  indebtedness,  state  bonds,  call  for  money  if  they 
would  circulate,  but  they  seldom  act  as  money  in  circulation.  (Traitd,  III, 
ch.  2.)  Sismondi  very  well  determines  the  difterence  in  his  Richesse  Com- 
merciale,  I,  160.  Rnu,  Lehrbuch,  I,  §  293,  requires  of  all  good  paper  money : 
a.,  that  its  mere  transfer,  even  without  any  proof  of  its  rightful  acquisition, 
should  suffice  to  vest  the  property  in  it  in  the  receiver;  b.,  that  the  power 
emitting  it  should  enjoy  universal  confidence  or  be  able  to  compel  universal 
recognition;  c,  that  its  redemption  should  not  be  fixed  for  any  definite  point 
of  time. 


4j(.0  paper  money.  [App.  I, 

Other  hand,  the  endeavor  to  insure  a  more  favorable  reception 
for  paper  money  by  the  promise  of  interest  has  been  exceed- 
ingly seldom  successful.^  And  in  reality,  good  prospects  as 
to  interest  (Zinsaussichten)  and  ease  of  transfer  from  one  hand 
to  another  are  two  qualities  which  lie  in  very  different  direc- 
tions.^ 

The  many  recent  writers  who  claim  for  paper  money  the 
marks  of  irredeemableness  and  forced  circulation,  confound 
the  unfortunately  too  frequent  degeneration  of  an  institution 
with  its  real  nature.  They  contradict,  too,  usage  of  speech, 
which,  in  countries  where  silver  is  the  standard,  unhesitatingly 

■*  That  it  is  not  possible  to  keep  paper  money  from  declining  in  value,  by 
the  payment  of  interest,  the  people  of  North  America  learned  from  more 
than  one  experiment  during  the  eighteenth  century.  (Benjamin  Franhlin^ 
Remarks  and  Facts  relative  to  the  Paper  Money  of  America,  1765.)  The 
same  phenomenon  was  observed  in  the  case  of  the  Spanish  valcs^  which 
Avere  created  during  the  North  American  war  in  consequence  of  the  absence 
of  the  silver  fleet.  (Boiir-going^  Tableau  de  1'  Espagne,  II,  38  ff.  Hum- 
boldt., N.  Espagne,  II,  SoS.)  When  the  Portuguese  ^/cj/zrw  (since  1797)  still 
bore  six  per  cent,  they  depreciated  in  value;  and  when  the  payment  of  the 
interest  was  suddenly  stopped,  the  rate  of  exchange  did  not  become  any 
lower.  (Balbt,  Esai  statist,  sur  le  Portugal,  I,  323.)  In  Austria,  in  Septem- 
ber, 1820,  the  bank  notes  which  bore  no  interest  were  at  a  premium  as  com- 
pared with  the  imperial  treasury  notes,  which  did  bear  interest  of  i  per  cent., 
although  the  credit  of  both  kinds  of  paper  had  ultimately  the  same  founda- 
tion, namely,  Austrian  state-credit. 

'  The  attenipt  to  make  paper  money  pay  interest  suggests  (as  the  Saint  Si- 
monists  recommend  it  should,  with  much  ado;  Etifantin,  Ser  les  Banques, 
d'  Escompte  in  the  Producteur,  1826),  that  awkward  sword,  invented  by 
Count  Wilhelm  von  Biickeburg,  to  the  blade  of  which  a  pistol  is  affixed ! 
Shortly  before  each  term  for  the  payment  of  interest,  the  circulation  of  such 
paper  money  would  be  arrested.  If  the  rate  of  discount  should  sink  below 
the  rate  of  interest  such  notes  bore,  they  would  be  sought  after  eagerly  and 
disappear  in  quantities,  and,  not  be  ever  seen  again  until  the  rate  of  discount 
had  risen  to  a  high  figure,  Avhen  they  would  be  suddenly  presented  for  re- 
demption. Such  interest-bearing  paper  money,  therefore,  would  be  a  seri- 
ous element  to  aggravate  the  fluctuations  of  the  money-market  between  good 
and  bad  times.  When  interest-bearing  paper  money  pays  interest  at  the  rate 
usual  in  the  country,  it  is  hoarded  by  misers,  (v.  Struensee.  Abhandlungen, 
III,  387.)  Compare  Forbotmais,  Principes  dconomiques,  p.  234,  ed.  Guill., 
whereas  f.  Pr/V^WiVz,  Kunst  reich  zu  werden  (1S40),  359,  takes  delight  in  elab- 
orating the  idea  of  an  interest-bearing  paper  money. 


Sec.  I.]  PAPER  MONEY  AND  MONEY-PAPER.  441 

calls  gold  coins  money,  although  they  cannot  be  forced  on  any 
one."  The  paper  monc}''  issued  by  the  state  deserves,  indeed, 
the  appellation  in  the  fullest  measure;  but  starting  from  this 
point  we  hnd  a  number  of  grades  in  a  downward  direction, 
whicli  may  still  be  called  mone}^;''  and  we  shall  see  especially 
that  the  differences  between  state  paper  money  and  bank 
notes  so  widely  asserted  are,  in  great  measure,  differences  not 
of  kind  but  of  deefree. 

The  idea  of  replacing  the  precious  metals  as  a  medium  of 
circulation  by  a  less  costly  material,  even  the  ancients  were 
acquainted  with ;  but  with  the  exception  of  the  Carthaginians, 
they  scarcely  ever  made  any  use  of  it  except  in  cases  of  need 
and  transitorily.^ 

^  Of  jurists,  see  Thol,  Handelsrecht,  I,  §  51,  and  the  authorities  for  and 
against  in  Goldschmidt^  Handelsrecht,  II,  Kap.  4,  i,  2.  The  compulsory 
circulation  of  paper  money  is  an  essential  element  only  in  reference  to  the 
person  that  issues  it.  Of  political  economists,  especially  A.  Wagner  in 
BluntschWs  Staatsworterbuch,  Art.  Papiergeld,  Band,  VII,  who,  however,  is 
very  soon  compelled  to  oppose  to  paper  money  "  proper,"  another  kind  not 
"proper."  Adam  Smith  unhesitatingly  accounts  bank  notes  also  paper- 
money.  (W.  of  N.,  IT,  ch.  2,  p.  2S,  Bas.)  Huskisson  understands  by  "paper- 
money  "  only  the  irredeemable  paper-mon«y  of  the  state,  while  bank  notes 
should  be  considered  as  "  paper  currency."  (The  Question  concerning  the 
Depreciation  of  our  Currency,  18 10.) 

">  Seyd,  Miinz,  Wahrungs-und  Bankfragen  in  Deutschland,  50  fF.,  distin- 
guishes four  classes  of  paper-money:  ist  class,  paper-money  covered  by 
cash ;  2d  class,  bank  notes  covered  after  the  manner  of  banks ;  3d  class,  state 
paper-money;  4th  class,  svich  paper  money  as  the  notes  of  the  Southern 
Confederacy  after  its  defeat. 

^Even  Plato,  De  Legg.,  V,  742,  was  acquainted  with  money  after  the  Spar- 
tan type,  intended  only  for  internal  trade :  VOfXCfffxa  Irtijcopcov^  WJTdtz, 
fxev  ivTCfxov  roT?"  dk  dXXoc^  dv&f>io~occ;  ddoxc/jov.  Besides  the  state 
kept  for  foreign  trade  a  supply  of  the  universal  Hellenic  money,  of  which 
in  case  of  need,  private  individuals  could  acquire  what  portion  they  needed 
by  exchange.  When  Dionysius  I.  issued  tin  instead  of  silver  money,  all  the 
Syracusans,  although  they  noticed  the  forgery,  acted  in  their  intercourse 
with  one  another  as  if  they  considered  the  coins  genuine.  (Aristot.,  CEcon., 
11,21,  Pollux,  IX,  79.  Timotheos  behaved  more  honorably  when,  pressed 
by  the  dearth  of  money,  he  gave  his  troops  copper  coin  tokens,  which  passed 
for  the  time  being  for  their  full  value  in  the  camp;  but  which  Avere  later  to 
be  redeemed  at  their  full  value  in  silver.     (Aristot.,  CEc.   II,  22.)     Compare 


4:4:2  PAPER  MONEY.  [App.  I. 

Similarly,  the  middle  ages  in  Europe;  as  in  general  all 
greater  development  of  the  credit-system  —  and  all  paper 
money  is  credit-money — has  a  natural  growth  only  in  the 
higher  stages  of  civilization.^  ^^ 

PolycEii,  Strateg.,  IV,  lo,  2.  The  iron  money  which  the  Klazomenians  ex- 
clianged  with  the  rich  for  silver,  which  bore  interest,  but  wliich  the  rich 
were  forced  to  take,  had  a  longer  duration;  the  silver  was  used  to  pay  for- 
eign state  creditors,  the  iron  money  circulated  for  the  time  being  in  the  city, 
and  was  gradually  redeemed.     (Aristot.^  loc.  cit.,  II,  17.) 

We  are  still  more  forcibly  reminded  of  paper  money  by  the  Carthagenian 
leather  money,  where  any  object  whatever  of  the  size  of  a  coin  was  shut  up 
in  a  leather  envelope  with  the  state  seal,  and  then  circulated  as  if  it  were  the 
coin  it  purported  to  be.  Mien's,  Beschryving  der  Munstn,  1726,  explains  the 
saga  of  Dido's  ox-skin  by  means  of  this  leather  money.  Certain  it  is,  how- 
ever, that  the  surprise  with  which  the  sophistical  dialogue,  Eryxias,  mentions 
the  matter,  is  a  proof  how  foreign  it  was  to  the  Greeks.  Concerning  the 
Roman  plated  denarii  which  were  stamped  with  the  silver  coins,  but  which 
were  also  accepted  by  the  state  treasury,  see  Mommsen,  R.  G.,  I,  405. 

^  In  ihe  middle  ages,  leather  money  was  issued  as  a  promise  of  future  pay- 
ment: by  the  doge  of  Venice  in  the  wars  of  1122  and  1126  (Montanari,  Delia 
Moneta,  34);  by  King  John,  of  England,  during  the  struggle  of  the  barons 
(Camden);  Emp.  Frederick  II.  at  the  siege  of  Faventia  ("il/^fc^/z^/,  Hist.  Fior., 
130,  Villani,  Hist.  Fior.,  VI,  21) ;  by  Louis  IX.  during  his  captivity  (v.  Raumer 
Hohenstaufen,  V,  461),  John  of  France,  1360  (Anderson,  Origin  of  Com- 
merce). On  the  Frankfurt  lead  marks  which  w-ere  afterwards  redeemed  by 
the  Rechnerei:  Kirchner,  I,  541.  Lavallette's  copper  tokens  during  the  siege  of 
Malta  had  the  inscription:  non  cbs  sed fides.  The  paper  money  which  was  is- 
sued during  the  siege  of  Leyden,  the  inhabitants  afterwards  would  rather 
preserve  than  have  redeemed,  ad  ferpetuain  liberationis  div'mce  menioriatii. 
(Bornitii,  De  Nummis,  1605,  I,  15.  Distress  coins,  melacs,  during  the  siege 
of  Landau  and  of  the  Hungarian  Ragoczy,  Marfurgcr,  Beschreibung  der 
Banquen,  213.     Krones,  Zur  Geschichte  Ungarns  im  Zeitalter  R's,  1870.) 

'"  The  Chinese  have  had  various  kinds  of  paper-money  in  their  country 
since  the  7th  century  after  Christ.  Sometimes  they  called  them  "  flying 
coins,  convenient  coins,"  and  sometimes  coupons,  bans,  conventions  (Klaproth, 
Memoires  relatives  a  I'Asie,  I,  375  if.),  against  which  the  caravans,  as  soon  as 
they  had  passed  the  limits  were  obliged  to  exchange  their  silver  (Pegolotti, 
Pratica  dclla  Mercatura  in  Delia  decima  etc..  Ill,  3).  These  had  compulsory 
circulation  in  China.  The  great  Mongolian  khans  here  became  acquainted 
with  paper-money.  (M.  Polo,  II,  21.)  Thus,  especially  in  Persia,  where  re- 
fusal to  accept  such  money  and  the  imitation  of  it  was  punished  with  death 
(1340).  Compare  Ferishta,  ed.  Briggs,  I,  414  IT.  d^Ohsson,  Hist,  des  Mon- 
gols, IV,  loi  ft".;  II,  4S7.     Even  here  there  occured  cases  of  state  bankruptcy 


Sec.  II.]        ADVANTAGES  AND  DISADVANTAGES.  44,3 

SECTION  II. 

ADVANTAGES    AND    DISADVANTAGES  OF  PAPER  MONEY. 

Where  it  is  at  all  possible  to  give  paper  money  the  same 
purchasing  power  as  metallic  money  possesses,  it  is  unquestion- 
able that  the  former  must  have  many  advantages  over  the  lat- 
ter. True,  paper  money  is  very  inconvenient  for  small 
amounts ;  ^  but  all  the  more  convenient  for  large  amounts,  as 
well  for  purposes  of  counting  as  for  purposes  of  the  storing 
up  of  values  and  for  transmission  from  place  to  place;  a  matter 
of  greater  importance  in  proportion  to  the  badness  of  a  coun- 
try's means  of  transportation,  and  to  the  cheapness  of  the  metal 
of  its  currency  hitherto.^  It  seems  a  still  more  important  matter 
to  most  people  that  paper  money  dispenses  with  the  use  of  a 
great  quantity  of  the  precious  metals  for  purposes  of  circula- 
tion, which  can  now  either  be  turned  into  utensils,  etc.  in  the 
country  itself  or  used  in  foreign  countries  to  make  investments 
of  capital  there,  or  in  the  purchase  of  commodities.^     In  na- 

and  finally  withdrawals  of  the  depreciated  paper.  Klaprotli^  loc.  cit.)  In 
Japan,  according  to  Oliphant^  Narrative  of  L.  Elgin's  Mission  to  China  and 
Sapan  (1859),  all  foreign  coins  were  required  to  be  exchanged  against  paper- 
money  at  the  offices  of  the  state  bankers. 

'  Adam  Smith  mentions  North  American  paper  money  of  the  amount  of 
I  shilling,  and  Yorkshire  bank  notes  of  the  amount  of  i^  shillings.  Sweden 
had,  until  1S28,  notes  of  2'$>  pfennigs. 

2  Hence  in  Sweden,  with  its  copper  standard  of  long  duration,  the  sj'stem 
of  banks  of  issue  was  developed  very  early.  The  transport-notes  (Trans- 
fortzcttcl)  (to  be  found  in  that  country  as  far  back  as  1661)  of  the  Stockholm 
bank  are  considered  the  oldest  bank  notes.  Compare,  however,  Palgrave, 
in  the  Statist.  Journal,  1873.  When,  in  1768,  Catherine  II.  introduced  paper 
money  into  Russia,  the  people  gladly  paid  }(  per  cent,  exchange  to  the  state 
treasury  for  it.  (BrUckner,  in  Hildebrand's  ]ii\\YhuchQr,  1863,  49.)  Accoi-din"- 
to  CcDicrin,  Oconomie  der  menschl.  Gesellschaft,  116,  private  individuals  in 
from  four  to  five  months  exchanged  40  millions  of  silver  roubles  for  paper. 
And  thus,  in  17S0,  Berlin  bank  notes  stood  a  few  per  cent,  above  par,  and 
the  notes  of  the  S.  Carlos-Bank,  in  1788,  from  i  to  i^  per  cent.  (Rau,  Ar- 
chiv.,  II,  161.) 

3  When  at  times  in  which  paper  money  is  looked  upon  with  diffidence 


4,4:4:  PAPER  MONEY.  [App.  I. 

tional  economies  whose  commerce  is  a  growing  one,  the  same 
advantage  finds  a  negative  expression  in  this,  that  they  are  not 
compelled  to  satisfy  the  increasing  demand  for  money  by  pro- 
curing costly  metals.*  Of  the  individual  members  of  the  na- 
tion, all  these  advantages  of  convenience  will  be  experienced 
by  those  who  employ  the  paper  money.  The  economical  or 
saving  advantages  of  paper  money  are  appropriated  by  the 
issuers  to  themselves,  in  the  form  of  a  non-interest  bearing 
loan,  which  they  make  to  those  owners  of  money  or  to  those 
who  are  entitled  to  a  money-claim  and  to  whom  the  paper 
money  is  acceptable  instead  of  cash  mone}^^  A  diminution 
for  instance  of  the  number  of  bank  notes  or  of  state  paper 

peasants  and  others  bury  their  metallic  money,  this  advantage  of  course  is 
lost.  On  the  other  hand,  the  exportation  of  precious  metal  money,  caused 
by  the  emission  of  paper  money,  must  not  be  considered  a  necessary  evil, 
but  rather  as  the  condition  precedent  which  in  most  cases  makes  the  above 
advantages  of  the  paper  money  possible  for  the  first  time.  Compare  Ad.  War- 
ner, Die  russische  Papierwahrung  (iS6S),  22,  24,  33.  Ht'cardo,  Proposals  for 
an  economical  and  sure  Currency,  1S16,  estimated  that  England,  after  the 
abolition  of  the  bank  restriction,  needed  twenty  million  pounds  sterling. 
The  interest  on  this  amount  of  capital  inclusive  of  wear  and  tear  etc.,  should 
be  estimated  at  at  least  ten  percent. ;  that  is  for  the  whole  kingdom  at  at  least 
ft-om  two  and  one-half  to  three  millions  a  year.  On  this  Ricardo  founded  his 
proposal  to  base  the  bank  notes  on  gold  bars.  In  its  time,  the  essay :  Guineas 
an  unnecessary  and  expensive  Incumbrance  on  Commerce,  or  the  Impolitj' 
of  repealing  the  Bank-Restriction  Bill  considered  (London,  1802),  met  ^vith 
great  approval. 

*Adam  S?nith  calls  attention  to  the  analogous  case  in  which  a  manufac- 
turer replaces  a  costly  machine  by  a  cheap  one,  sells  the  former  and  em- 
ploys the  diiference  between  the  old  one  and  the  new  in  enlarging  his 
business.  (W.  of  N.,  II,  ch.  2.)  When,  indeed,  all  nations  have  introduced 
the  use  of  paper  money,  the  greater  portion  of  the  advantages  which  the  one 
nation  was  able  to  obtain  by  its  means  cease,  and  the  only  ultimate  result  is 
a  depreciation  of  the  value  of  money  and  of  the  precious  metals.  Formerly 
the  advantage  reaped  by  the  single  nation  that  emitted  paper  money  was 
greater  than  its  share  in  the  depreciation.     (Wolozush',  Enqu^tede  1S65,  loS.) 

*  When  E.  Seyd  calls  bank  notes  more  costly  than  metallic  money,  because 
the  former  in  England  require  an  outlay  for  administration  of  i^  per  cent, 
per  annum,  while  the  wear  and  tear  of  metallic  money  amounts  to  i  per 
cent,  only  in  20  years  (Statist.  Journal,  1872,  511),  he  overlooks  the  loss  in 
interest  and  the  costs  of  coinage  in  the  latter  case. 


>^ 


Sec.  II.]         ADVANTAGES  AND  DISADVANTAGES.  445 

money  does  not  diminish  the  available  capital  of  the  people. 
Its  only  effect  is  that  a  smaller  portion  of  it  is  at  the  disposal 
of  the  bank  or  of  the  government. 

But  in  contrast  with  these  advantages  are  the  great  disad- 
vantages, since  paper  mone}^  is  wanting  in  most  of  those 
properties  which  originally  made  the  precious  metals  the  best 
instruments  of  exchange  and  the  best  measures  of  value.  In 
addition  to  this,  paper  money  may  be  increased  at  pleasure, 
and  at  almost  no  cost;  and  an  occasional  surplus  of  it  cannot 
flow  either  into  other  branches  of  employment  (as  a  surplus  of 
metallic  money  may  into  utensils,  ornamentation,  etc.)  nor  in- 
to other  countries.  And  thus  the  constancy  of  value  of  paper 
money,  that  is,  one  of  the  chief  requisites  of  all  good  money,is 
imperiled  in  the  highest  degree.  True,  the  paym  ent-power, 
or  "  legal  tender  "  character  given  such  money  by  the  state 
may  certainly  supplement  in  some  way  its  matter  and  form- 
value.  But  this  supplement  or  addition  constitutes,in  the  case 
of  large  amounts,^  a  small  quota;  or  else  the  quantity  of  money 
as  compared  with  the  amount  of  money  needed  for  commerce 
would  have  to  be  fixed  very  accurately;  a  thing  of  peculiar 
difficulty  in  the  case  of  paper  money,  which  is  almost  costless.'^ 

^  Related  to  this  is  the  fact  that  in  France,  during  the  assignat-crisis,  the 
large  bills  of  10,000  francs  were  harder  to  get  rid  of  than  the  small  ones. 
(A.  ScJimtdt's  Parisier  Zustande,  III,  22.) 

'  The  numbering  of  paper  money.  A  state  which  should  neglect  this 
would  not  only  reserve  to  itself  the  possibility  of  an  unlimited  increase,  but 
would  surrender  all  control  of  its  officials  charged  with  the  emission  of  the 
paper  money.  Latv,  Trade  and  Money,  162,  advises  that  a  large  money  re- 
ward should  be  paid  to  any  one  who  should  show  the  existence  of  a  higher 
number  than  allowed  by  law,  or  of  a  duplicate  number.  And  indeed,  as 
comptroller-in-chief,  he  caused  the  frdvot  des  tnarckands  to  be  removed,  be- 
cause charged  with  the  duty  of  burning  the  paper  withdrawn  from  circula- 
tion, he  (the^rdvoi)  noticed  that  the  same  number  reappeared  several  times. 


446  PAPER  MONEY.  [App.  I. 

SECTION  III. 

KINDS  OF  REDEMPTION. 

While  precious  metal  money  carries,  so  to  speak,  by  far  the 
greater  portion  of  its  value  in  itself,  and  this  to  such  an  extent 
that  it  appears  on  the  inscription  found  on  its  face,  the  inscrip- 
tion found  on  paper  money  is  almost  the  only  reason  of  its 
value.^  (Credit-value.)  The  issuer  promises  in  one  form  or  an- 
other, expressly  or  tacitly,  that  he  intends  to  redeem  the  note, 
almost  valueless  in  itself,  in  real*  goods ;  and  the  value  of  this 
promise  depends  on  the  probability  of  its  fulfillment.'-^  The 
only  fully  satisfactory  kind  of  redemption  consists  in  this,  that 
every  holder  of  the  paper  money  may,  immediately  on  demand, 
obtain  its  nominal  value  in  good  current  metallic  money. 
This  only  can,  in  the  long  run,  keep  paper  money  up  to  its  full 
nominal  value.  But  experience  teaches  that  even  with  less  per- 
fect modes  of  redemption,  paper  money  may  maintain  a  part  of 
its  nominal  value,  and  a  part  greater  in  proportion  as  the  fol- 
lowing conditions  are  approximated  to :  freedom  from  personal 
considerations,  the  immediateness  of  the  redemption,  and  cur- 
rency of  the  goods  by  means  of  which  redemption  is  effected. 
Thus,  for  instance,  the  acceptance  of  paper  money  for  all  debts 
due  the  state,  in  countries  where  taxation  is  heavy,  where 
there  are  large  state  industries  etc. ;  where  the  lauds  of  the 
state  are  farmed  out  etc.,  has  a  great  influence  on  its  course  of 
exchange.^     Redemption  in  parcels  of  land  is  a  very  imperfect 

'  If  a  traveler  wished  to  pay  his  inn-keeper  in  the  note  of  a  bank  entirely  un- 
known in  the  place,  the  latter  would  certainly  refuse  it.  If,  on  the  other 
hand,  the  traveler  were  to  offer  him  a  silver  coin,  the  stamp  and  inscription 
of  which  were  not  familiar,  still  it  would  be  taken  at  the  value  of  the  metal 
it  contained,  after  deduction  made  of  the  costs  of  testing  it,  re-coining  it,  and 
compensation  for  the  trouble  caused.  Ignored  by  Berkeley^  who,  indeed, 
considered  metallic  money  nothing  but  "  counters  "  or  tickets  (Querist,  No. 
23,  26,  441,  475),  and  who  ascribes  important  advantages  to  paper  money, — 
which  by  "stamp"  and  "signature"  is  made  as  costly  as  gold  (440) — over  me- 
tallic money  (226). 

2  Any  person  who  has  witnessed  a  tax-execution,  or  sale  of  property  for  the 


Sec.  III.]       ADVANTAGES   AND  DISADVANTAGES.  447 

one,  not  only  on  account  of  the  great  differences  in  the  value 
of  pieces  of  land  according  to  quality,  situation,  the  times  etc., 
but  also  because  only  a  very  small  number  of  men,  especially 
where  money  is  the  usual  medium  of  exchange,  are  in  a  con- 
dition to  accept  parcels  of  land.^   It  is  a  question  whether  the 

non-pajment  of  taxes  (Stuerexecution)  will  admit  that  a  tax  receipt  is  at  least 
as  real  goods  as  an  umbrella  or  a  glass  window  that  protects  one  from  the 
storm.  Alichazlis  considers  the  amount  of  running  payments  to  the  state 
for  duties,  taxes  etc.,  as  the  only  right  basis  for  full-value  paper  money.  (Ber 
liner  Vierteljahrsschrift,  1S63,  III.)  Better  yet  when  Hofkcn  advises  that 
only  as  much  paper  money  should  be  issued  as  amounted  to  the  average  bal- 
ance {Bestand)  in  the  national  ti'easury.  The  tax-basis  is  defended  with 
great  warmth  by  L.  Stein.  Louis  XIV.,  in  1704  issued  paper  money  bearing 
7  per  cent,  interest,  the  acceptance  of  which  by  all  the  royal  officers  of  the 
treasury  was  prohibited!  ('iPwi't^/,  Reflexions,  863,  Daire.)  Xaw,  Trade  and 
Money  (1705)  ascribes  to  parcels  of  land  the  greatest  constancy  of  value,  be- 
cause they  cannot  be  replaced,  because  they  can  be  neither  increased  nor  de- 
creased, and  because  they  help  to  produce  all  other  goods  (p.  170).  While 
silver  cannot  but  depreciate,  they  have  a  prospect  but  to  rise  (188).  Hence 
Lavj  recommended  notes  based  on  parcels  of  land  as  the  best  money.  (163, 
191,  195.)  Similarly,  Benjamin  Franklin,  Modest  Inquiry  into  the  Nature  and 
Necessity  of  a  Paper  Currency:  and  the  Paper  Money  of  Pennsylvania,  New 
York  and  New  Jersey  was  actually  based  on  parcels  of  land,  and  was  to  be 
extinguished  by  the  enfeoffed  owners,  and  the  interest  paid  by  them.  (Ebe- 
ling^  Gesch.  und  Erdbeschreib,  von  N.  Amerika,  III,  621,  IV,  649.) 

^  F.  Renonard  de  Ste  Croix,  Voyage  aux  Indes  orientales  (1810),  I,  32,  de- 
scribes a  species  of  paper  money  based  on  parcels  of  land  which  had  lost  40 
per  cent,  of  its  nominal  value,  although  the  holders  of  them  were  invested 
with  the  fief  at  only  one-half  their  value.  The  French  mandats  territoriaux 
of  1796,  declined  in  five  months  to  5  per  cent,  of  their  nominal  value,  although 
they  contained  the  provision  that  the  holders  might,  without  public  sale 
(Auction),  have  a  certain  amount  of  the  national  estates  allotted  to  them  in 
exchange  for  the  mandats.  The  assignats  were  still  more  defective  after 
their  redemption  (at  the  Caisse  de  Vcxtraordittaire),  which  was  at  first  in- 
tended, and  their  drawing  of  interest  were  not  fulfilled.  Leaving  the  tax- 
basis  out  of  consideration,  the  notes  might,  at  the  sale  of  the  national  estates, 
be  brought  in  as  means  of  payment:  a  thing  which  would  not  have  been  in- 
operative, provided  the  amount  of  the  paper  money  had  been  strictly  limited  to 
the  price  of  the  pieces  of  land  estimated  in  money.  On  the  ist  of  April,  1790, 
400,000,000  francs  in  assignats  were  issued,  and  in  September,  800,000,000 
more,  both  together  about  equal  to  the  secularized  property  of  the  church. 
(Ad.  Schmidt,  Pariscr  Zustande,  II,  97.)  But  as  afterwards  all  proportion 
between  these  two  magnitudes  ceased,  or  rather  as  up  to  January  i,  1793, 


448  PAPER  MONEY.  [App.  I. 

threat  of  punishing  the  refusal  to  accept  paper  money,  or  to 
accept  it  at  its  full  nominal  value,  can  be  called  a  negative 
mode  of  redemption.  Certain  it  is,  however,  that  it  is  the 
most  barbarous  and  in  the  long  run  the  least  efficient  mode, 
one  in  which  the  issuer  calculates  only  on  the  fear  of  those 
who  accept  it;  and,  w^hat  is  most  demoralizing,  on  the  hope 
they  entertain  that  they  in  turn  shall  be  able  to  dispose  of  it 
to  others  as  timid.^^ 

3,626,000,000  assignats  were  issued ;  up  to  September,  1794,  over  8,800,000,000 ; 
up  to  September,  1795,  19,700,000,000;  and  finally  up  to  September,  1796, 
45,578,000,000  francs,  of  which  perhaps  6,500,000  were  either  burned  or  de- 
monetized, the  price  of  the  national  estates  on  lands  must  naturally  have 
risen  as  vastly  as  the  assignats  declined. 

*The  paper  money  issued  by  Colbert's  successor,  Chamillard,  soon  lost  on 
account  of  its  too  great  amount,  25  per  cent,  of  its  value,  spite  of  the  fact 
that  it  bore  interest,  and  that  ]^  of  all  payments  to  private  persons  had  to 
be  made  in  it.  (Forbonnais^  Recherches  et  Considerations,  II,  182.)  When 
the  people  of  the  United  States,  in  1775,  issued  paper  money,  it  did  not  de- 
cline in  value  up  to  the  end  of  1776,  so  long  as  the  amount  did  not  exceed 
$20,000,000,  as  it  was  considered  a  matter  of  honor  to  take  it  at  par.  After- 
wards, when  the  amount  issued  continued  to  increase,  not  even  the  law  that 
a  refusal  to  accept  it,  or  insisting  on  taking  it  below  par,  should  be  punished 
with  the  loss  of  the  commodity,  and  that  the  guilty  party  should  be  declared 
a  national  enemy,  could  keep  it  from  declining  in  value;  so  that  in  May,  1871, 
a  dollar  in  specie  was  worth  $200.5  in  paper.  Compare  Franklin^  Works, 
ed.  Sparks,  II,  421,  VIII,  328,  505. 

France,  during  the  Reign  of  Terror,  on  the  2d  day  of  April  1793,  threat- 
ened the  claiming  of  a  discount  in  the  taking  of  assignats  with  six  years' 
confinement  in  chains,  and  on  the  ist  day  of  August,  on  Couthon's  motion, 
with  twenty  years'  confinement.  In  addition  to  this,  maximum  prices  for 
the  principal  necessities  of  life  were  fixed  and  the  exceeding  of  them  was  pun- 
ished by  severe  penalties ;  and  in  France,  and  still  more  in  the  neighboring 
conquered  countries,  there  were  many  persons  who  preferred  to  take  assignats 
instead  of  payment  rather  than  permit  themselves  to  be  robbed  by  requisi- 
tions. And  yet  on  the  4th  of  June,  1796,  one  franc  in  specie  exchanged  for 
800  francs  assignats.  Compare  Biisch,  Geldumlauf,  III  (§  58  ft'.,  d'lvernois^ 
Etat.  des  Finances  Fran^aise,  1796). 

5  The  Prussian  treasury  notes  of  1806,  by  virtue  of  a  decree  published  in 
1807,  were  to  be  taken  by  all  at  a  rate  of  exchange  to  be  ofiicially  published 
from  time  to  time.  Between  December  i,  1807,  and  February  28,  1809,  the 
highest  "  normal  course  of  exchange  "  was  71,  and  the  lowest  27  per  cent.  In 
January,  1815,  a  refusal  to  take  them  at  par,  except  in  certain  cases,  was 


Sec.  IV.]  COMPULSORY  CIRCULATION.  449 

SECTION  IV. 

COMPULSORY  CIRCULATION. 

When  paper  money  which  is  not  completely  redeemable  — 
and  it  is  scarcely  possible  that  in  the  long  run  it  should  be 
thus  redeemable  —  has  sunk  below  its  nominal  value,  the  re- 
sult in  the  case  of  all  private  paper  money  is  the  bankruptcy 
(Vcrmogensbruch)  of  the  individual  issuing  it;  in  the  case  of 
state  paper  money,  the  legal  provision  that  it  shall  have  a  com- 
puJaory  circulation  (Ztvangcoursc;  cours  force)}  To  what  ex- 
threatened  with  from  500  to  1,000  thalers  of  a  money-fine  or  from  6  to  12 
months'  imprisonment.  But  indeed,  in  December,  1812,  of  8,000,000  thalers, 
there  were  only  731,625  still  circulating.  Compare  §  7  of  the  decree  of  the 
19th  of  Januar}-,  1S13.  In  April,  1815,  it  was  ordered  that  the  half  of  all 
taxes  should  be  paid  in  such  notes,  or  that  if  not,  Sj^  per  cent,  should  be 
added  as  a  penalty.  This  penalty,  reduced  in  1827  to  i  silver  groschen, 
was  not  formally  abolished  even  in  1S70,  although  it  had  long  fallen  into  disu- 
etude.  There  was  a  run  of  the  owners  of  the  notes  in  1830,  for  redemp- 
tion, and  again  in  1841  and  1848;  in  1848  to  the  extent  of  at  most  40,000 
thalers  in  one  day,  and  altogether  not  over  100,000  thalers.  (Bergius,  in  the 
Tiibinger  Zeitschr.,  1870,  226  if.)  About  1846,  it  was  estimated  that  scarcely 
i\o  '"■  JS'ir  °f  Prussian  paper  money  was  presented  for  redemption,  while  ^ 
of  the  state  receipts  came  in  in  the  shape  of  paper  money.  (Rati,  Archiv.,  V, 
125,  207.)  The  Saxon  ti-easury  notes  never  lost  over  2  per  cent.,  although 
the  state  treasury  redeemed  them  up  to  1804  only  at  an  agio  of  9  pfennigs 
per  thaler,  and  afterwards  of  i  ffennig. 

'  Those  entitled  to  make  money  claims  are  either  compelled  to  accept  the 
paper  money  at  its  nominal  value  or  only  at  its  current  value  for  the  time 
being.  In  the  latter  instance,  the  unjust  compulsion  is  much  smaller,  but  at 
the  same  time  the  whole  expedient  is  much  less  productive  to  the  state ;  and 
hence  the  former  is  the  more  usual.  It  was  provided  in  Austria  on  the  22d 
of  May  and  the  2d  of  June,  1848,  that  the  former  should  be  the  rule,  and  that 
the  latter  should  govern  in  cases  in  which  gold  or  foreign  silver  had  been 
stipulated  ibr.  (Hofken,  Oesterreichs  Finanzprobleme,  p.  53.)  On  the  7th 
of  February,  1S56,  it  was  permitted  to  contract  by  express  promise  for  loans 
in  the  metallic  currency  of  the  country,  both  for  the  interest  and  the  repay- 
ment of  the  principal.  Hence  a  species  of  parallel-currcnc3\  ^^  ^^  be  made 
entirely  impossible  for  private  individuals  to  protect  themselves  against  the 
compulsory  circulation  of  paper  money,  the  more  prudent  are  forced  to  send 
their  capital  into  foreign  countries,  which  operates  very  disadvantageously  to 
poor  countries  especially.  (Wagfier,  Tubing.  Zeitschr.,  1S63,  441.) 
Vol.  L  — 29 


450  PAPER  MONEY.  [App.  I. 

tent  the  real  rate  of  exchange  of  paper  money  shall  fall  in  any 
case  depends  not  only  on  the  amount  issued  as  compared  with 
the  wants  of  trade,  but  also  and  still  more  on  the  degree  of  con- 
fidence which  the  state  of  public  affairs  inspires.^  The  first 
consequence  attending  a  depreciated  currency  is,  that  the  good 
precious  metal  money  is  withdrawn  from  circulation  and  even 
from  the  country;  for  the  reason  that  it  cannot  maintain  its 
true  value  side  by  side  with  the  paper  money ;  the  usual  effect 
in  all  untenable  mixed  standards  or  currencies.^    A  second,  and 

*  Thus,  for  instance,  the  Frederick  coins,  and  for  a  time  the  French  assignats 
were  helped  by  the  popular  enthusiasm,  while  Gustavus  III.,  of  Sweden, 
could  give  little  value  to  his  paper,  (v.  Strue?tsee,  Abh.,  Ill,  577.)  In 
France,  in  1796,  2,400,000,000  maiidats  were  issued  instead  of  all  the  out- 
standing assignats;  that  is,  as  many  as  there  were  assignats  at  the  close  of 
the  year  1792.  And  yet  the  latter  were  then  only  25  per  cent,  below  par ; 
the  former,  before  one  month  had  elapsed.  So,  and  in  nine  months,  almost  98 
per  cent,  below  par.  (St  Cliamaus,  Nouvelle  Essai  sur  la  Richesse  des  Na- 
tions, p.  150.  (A.  ScJimidf,  Parisier  Zustiinde,  III,  121  if.)  In  Austria,  in 
181 1,  the  volume  of  paper  money  was  contracted,  but  in  a  manner  so  violent 
and  destructive  of  credit  that  its  rate  of  exchange  did  not  rise  in  conse- 
quence. (Tub.  Zeitschr.,  1763,  1874.)  After  184S,  also,  the  rate  of  exchange 
of  Austrian  paper  money  was  much  more  perceptibly  influenced  by  the 
variations  in  the  political  state  of  affairs  than  by  the  changes  in  its  volume. 
(Tub.  Zeitschr.,  1856,  129.)  In  the  summer  and  winter  of  1866,  about 
650,000,000  paper  rubles  circulated,  with  scarcely  any  increase  or  decrease ; 
and  yet  the  ratio  of  exchange  was,  during  a  part  of  the  summer,  66,  and  in 
winter,  84  per  cent,  of  the  silver  value  of  the  ruble.  (Wagner,  Russ.  Pa- 
pierwahrung,  74.)  Instances  in  which  the  increase  in  the  price  of  commod- 
ities began  to  be  more  general  only  after  the  volume  of  paper  money  had 
decreased;  in  Austria,  in  1851  and  1866;  in  Russia,  in  1857  (loc.  cit). 

'  Then  precious  metal  money  becomes  a  commodity  of  .which  great  stores 
may  be  collected  in  the  country  itself,  at  the  banks,  but  chiefly  for  foreign 
trade.  It  is  said  that  Austrian  business  men  in  1S60  and  the  following  years 
invested  "hoards"  to  the  amount  of  several  hundred  million  florins  in  ex- 
change on  metallic-currency  counti'ies.  (Tiib.  Zeitschr.,  422.)  Good  paper 
money  will  never  drive  out  the  whole  supply  of  cash  money  out  of  a  coun- 
try, because  a  good  portion  must  always  be  kept  for  purposes  of  redemption ; 
depreciated  paper  money  operates  much  farther  in  this  direction.  Even  the 
exportation  of  small  change  may  become  a  profitable  speculation  as  soon  as 
the  amount  of  depreciation  of  paper  money  exceeds  the  seigniorage.  Then 
usually  small  change  of  a  worse  kind  is  stamped,  as,  for  instance,  in  Aus- 
tria, copper  instead  of  silver;  and  in  i860,  12  millions  florins  of  paper  small 


Sec.  IV.]  COMPULSORY  CIRCULATION.  45 1 

worse  consequence  is  the  unrightful  revolution  produced  in  so 
many  income  and  property  relations,  based  on  old  contracts,  to 
the  advantage  of  the  debtor,  to  the  disadvantage  of  the  cred- 
itor, and  of  those  who  receive  nominally  fixed  salaries.*  These 
consequences  are  in  kind  similar  to  those  produced  by  the 
clipping  of  the  coin;  but  in  degree  the}"  are  much  more  dan- 
gerous. ^  Besides,  the  depreciation  of  paper  produces,  by  no 
means,  an  equal  rise  in  the  prices  of  all  commodities.  The 
prices  of  those  commodities,  the  sellers  of  which  are  most 
favorably  situated  in  the  struggle  for  prices,  rise  earliest  and 
highest.  This  is  true  especially  of  foreign  commodities,  also 
of  those  inland  commodities  which  can  be  easily  exported, 
and  most  particularly  of  those  commodities  which  have  the 

change.  Here  the  exportation  of  the  better  money  is  not  a  consequence,  but 
the  motive  to  the  manufacturing  of  the  worse. 

*  During  the  assignat-period  it  could  happen  that  a  land  owner,  after  the 
term  for  which  he  had  farmed  out  his  land,  might  be  compelled  to  surrender 
it  to  the  farmers,  for  the  reason  that  the  taxes,  requisitions,  etc.,  paid  by  the 
farmers,  amounted  to  more  than  the  farm  rent.  In  the  case  of  the  former, 
the  calculation  was  based  on  the  recent  depreciated  value  of  the  assignats ; 
in  the  case  of  the  latter,  on  the  higher  value  the  assignats  had  at  the  moment 
tha-t  the  contract  was  concluded.  (BiiscJi,  Geldumlauf,  III,  62.)  A  writer 
in  the  Revue  des  deux  Mondes,  April  15,  1865,  thinks  that  one  reason  why 
the  American  civil  war  was  so  popular  in  the  northwest  was  because  the 
paper  money  issued  during  the  rebellion  made  it  easy  for  that  part  of  the 
country  to  pay  off  the  mortgage-debts  which  had  burthencd  it  since  1848. 
Even  of  the  two  law  catastrophes,  Duclos.  in  his  memoirs,  remarks  that 
they  produced  a  great  admixture  of  those  who  had  been  formerly  separated 
hy  differences  of  class  and  wiped  out  thepreviousideasof  decorum,  fitness,  etc. 

*  During  the  time  that  the  clipping  of  the  coin  was  practiced,  it  is  scarcely 
possible  to  show  that  money  was  debased  below  11  per  cent,  of  what  its  value 
should  have  been.  See,  on  the  other  hand,  §  3.  In  Austria,  in  iSio,  a  per- 
son had  to  give  1,200  florins  in  paper  money  for  100  florins  in  silver.  (Tiib. 
Zeitschr.,  1861,  593.)  In  North  America,  in  1781,  it  took  $280  in  paper  to 
purchase  $1  in  silver.  (Ebeling^  Gesch.  und  Erdbeschreib.,  von  N.  A.,  1856, 
III,  580;  IV,  440;  V,  437.)  During  the  American  civil  war,  the  paper  money 
of  the  Southern  States  declined  to  ^  (December,  1863)  and  even  to  -^-^  (Oc- 
tober, 1864)  of  its  nominal  value.  Compare  Hoch^  Finanzen  der  V.  Staaten, 
514  ff.  Observed  even  by  StorcJi,  Handbuch,  7?a?^V  translation.  III,  141  if. 
(See,  on  the  other  hand,  C.  King,  Thoughts,  p.  113.)  In  Paris  in  Julv,  1795, 
the  greater  number  of  commodities  estimated  in  assignats  were  worth  as 


452  PAPER  MONEY.  [App.  I, 

greatest  capacity  for  circulation,  for  instance,  gold  and  silver.^ 
Hence,  it  would  be  a  great  mistake  in  countries  where  there 
is  an  irredeemable  paper  currency  with  compulsory  circula- 
tion, to  measure  its  purchasing  power  at  a  special  discount  as 
compared  with  the  precious  metals.  Therefore,  a  depreciated 
paper  currency  has  transitorily  an  effect  on  industry  similar  to 
that  of  a  protective  tariff,  and  even  as  the  payment  of  export 
premiums;  inasmuch  as  it  enables  manufacturers  to  permit  a 
part  of  their  cost  of  production,  viz. :  that  which  they  have  to 
pay  their  workmen,  their  older  creditors,  and  in  part,  also, 
their  furnishers  of  raw  material,  to  rise  in  a  less  degree  than 
the  paper  money  has  declined  in  value.''^  This  is  indeed  a  very 
inequitable  advantage  accorded  to  private  individuals  in  the 

much  as  if  the  rate  of  exchange  of  the  latter  was  6-14  per  cent,  of  their 
nominal  value,  while  it  actually  amounted  to  only  3^  per  cent. 

"  Where  an  agio  of  exchange  of  metallic  money  as  compared  with  paper 
is  prohibited,  the  decline  of  the  latter  will  manifest  itself  not  only  in  foreign 
rates  of  exchange,  but  also  in  the  price  of  bars  of  the  precious  metals. 

'  The  changes  of  the  agio  or  premium  depend  mainly  on  the  supply  and 
demand  of  the  precious  metals,  that  is,  on  the  extent  and  intensity  of  the  busi- 
ness transactions  which  have  to  be  made  in  these  metals  themselves.  (Wag- 
ner^ Russ.  Papierw.,  87.)  Hence,  for  short  periods  of  time,  it  may  be  said 
in  a  paper  currency  country,  that  business  transactions  based  on  cash  money 
have  a  great  element  of  variation  in  them.  (  Wagner  in  BluntschW s  Staats- 
wSrterbuch,  III,  971.)  The  purchase  and  lease-hold  prices  of  fixed  capital,  of 
houses,  for  instance,  rise  much  less  because  most  people  look  upon  the  dis- 
tress as  transitory,  and  of  short  duration.  (A.  Walker,  Sc.  of  W.,  133.)  In 
Austria-  in  1859,  the  rise  of  the  agio  of  exchange  of  silver  from  par  to  40  per 
cent.,  and  its  subsequent  fall  within  7  months  to  20  per  cent.,  left  the  price  of 
coin  almost  entirely  unaffected.  (A.  Wagner,  Gdtt.  Anz.,  1S60,  114.)  That 
country  people  in  general  suffer  more  from  a  bad  paper  currency  than  the 
towns  people  and  inhabitants  of  cities,  see  Bonaniy  Price,  Currency  and 
Banking,  175,  seq.  In  the  northern  states  of  the  American  union,  in  1864, 
12  home  kinds  of  commodities  had  risen  148  per  cent,  7  foreign  kinds  of 
commodities,  164  per  cent.,  and  7  which  could  be  obtained  only  from  the 
southern  states,  353  per  cent.  (v.  Hock,  186  seq.)  As  too  great  issues  of  pa- 
per money  are  so  frequently  made  on  account  of  war,  it  is  comparatively 
easy  to  understand  why  it  is  that  articles  for  which  war  creates  a  demand 
should  rise  in  price  very  soon  and  very  high;  while  the  very  opposite  hap- 
pens in  times  of  taxation-distress,  in  the  case  of  a  great  many  articles  of  lux- 
ury, which  can  readily  be  dispensed  with.     BUsch  remarks  (Werke,  VII,  91), 


Sec.  IV.]  COMPULSORY  CIRCULATION.  453 

face  of  the  universal  distress  of  the  country.^  ^  And  these  bad 
consequences  are  aggravated  by  the  downward-path  princi- 
ple which  a  depreciated  paper  money  always  involves.  The 
state  whose  financial  distress  introduced  the  evil,  sees  a  great 
portion  of  its  revenues  melt  away  before  its  eyes;^°  while  in 
what  concerns  its  outlay,  nothing  is  more  calculated  to  mis- 
lead it  than  such  an  imagined  creation  out  ot  nothing.  And  a 
thing  which  greatly  contributes  to  this  is  the  frightful  sensi- 
tiveness of  a  depreciated  paper  currency  in  the  presence  of 
complications  of  foreign  politics,  a  quality  which  may  cause 
the  government  as  many  inconveniences  from  without  as  the 
issue  of  its  paper  money  produced  conveniences  to  it  at  home.''^ 

that  retail  dealers  frequently  raise  their  prices  in  order  not  to  be  obliged  to 
pay  out  so  many  small  coins  as  change  for  the  paper  dollar. 

8  Compare  Hufeland^  N.  Grundlegung,  II,  241.  Self-seeking  undertakers 
(  Unternehmer  =^  men  of  enterprise)  have,  on  this  account,  both  in  Austria 
and  Russia  (Wagner,  Russ.  P.  W.,  105),  but  more  so  in  North  America  (v. 
Hock,  556  ft"),  opposed  measures  intended  to  restore  values  (  Valuta),  on  the 
ground  that  they  were  anti-national.  Even  Sperausky  experienced  this  in 
1809,  when  he  published  very  correct  ideas  on  paper  money,  while  in  the 
"fairy"  times  of  Catherine  II.,  no  one  even  thought  that  state  paper  money 
is  a  state  debt.  (Bernhardi,  Russ.  Geschichte,  II,  2,  636.)  One  of  the  prin- 
cipal representatives  of  this  course  is  H.  C.  Carey,  Our  Resources  (1866),  and 
in  the  New  York  Herald,  1865.  On  the  other  hand,  Faucher  rightly  calls 
the  more  active  exportation  of  countries,  with  a  bad  paper  currency,  an  ex- 
portation of  barbarous  nations,  the  commerce  of  misery,  to  which  any  price 
paid  in  metal  or  in  any  higher-standing  product  of  civilization  is  acceptable. 
(Vierteljahrsschrift,  1868,  IV,  167.)  The  nation  in  the  aggregate  loses  in  in- 
ternational trade  for  the  simple  reason  that  its  foreign  creditors  will  accept 
its  paper  money  at  most  at  its  current  rate  of  exchange  against  specie,  while 
foreign  debtors  force  it  upon  the  nation  at  its  nominal  value. 

^  The  different  provinces  also  of  a  large  empire  may  have  very  different 
degress  of  depreciation  of  the  same  paper  money.  Thus,  in  the  interior  of 
Russia  its  rate  of  exchange  against  specie  had  for  a  long  time  not  declined 
beyond  50  per  cent,  of  its  nominal  value;  while  the  foreign  rate  of  exchange 
supposed  a  decline  to  33^/^  per  cent.     (Cancrin^  Weltreichthum,  68.) 

'0  An  enhancement  of  duties,  taxes  (Abgaben)  etc.,  will  seldom  be  able  to 
progress  in  the  same  measure  as  the  paper  money  sinks ;  in  any  case,  a  law 
would  be  necessary  to  effect  this,  which,  however,  comes  always  later  than 
the  decline.     (Stsmoudi,  Du  Papier  Monnaie,  27.) 

"  Wagner,  Russische  Papierwtihrung,  142,  estimates  that  the  Crimean  war 


454  PAPER  MONEY.  [App.  I. 

Hence  recourse  is  had  to  additional  issues  of  paper,  which  are 
easily  increased  in  the  same  measure  as  the  rate  of  exchange 
(Conrs)  has  declined.  ^^  Great  private  interests  operate  in  the 
same  direction.  Between  the  increase  of  the  volume  of  the 
paper  currency  in  circulation  and  its  consequent  depreciation, 
some  time  always  elapses;  and  in  the  mean  time,  either  the 
purchasing  power  of  the  money-owner  or  his  loaning  capital 
is  really  greater  than  before.  The  former  increases  the  de- 
mand for  commodities,  the  latter  facihtates  their  coming  into 
existence.  However,  the  flight  of  speculation  with  which  the 
increase  of  paper  money  is  wont  to  be  accompanied  ^^  in  the 
beginning  depends  on  an  error  shared  by  many  men  as  to  its 
true  value.  Hence  it  does  not  last  long,  and  the  critical  shriv- 
eling up  of  the  inflated  bubbles  is  greater  in  proportion  to 
what  the  previous  dimensions  of  these  bubbles  were.  And 
now  many  believe  that  the  nation's  business  or  economy 
might  be  kept  on  its  course  by  new  emissions  of  paper  money; 
and  the  wise  ones  hope,  at  least,  to  be  able  thereby  to  post- 
pone the  catastrophe  long  enough  to  enable  themselves  to  get 
their  property  into  a  safe  condition.  And  in  fact,  the  restora- 
tion of  a  depreciated  currency  is  accompanied  by  crises  en- 
tirely similar  to  those  which  followed  its  first  decline;  only 
they  are  in  an  opposite  direction.^^     And  hence  conscientious 

depreciated  the  average  current  rate  of  exchange  of  Russian  paper  monej 
by  I  I.I  percent,  the  Italian  war  of  1S59  by  14.5  per  cent.,  the  German  war 
of  1866  by  19.4  per  cent.,  spite  of  tlie  fact  that  Russia  did  not  participate  di- 
rectly in  the  last  two  wars. 

"'The  more  than  forty-five  milliards  French  a ssignats,  estimated  at  their 
rates  current,  really  produced  to  the  state  only  about  six  milliards.  (Ge?itz, 
Histor.  Journ.,  i8oo,  II,  317,  after  Lecoidicux.) 

13  Very  well  explained  by  H.  Thornton^  Paper  Credit  of  Great  Britain,  ch. 
10.  As  to  how,  in  Austria,  the  paper-money  crisis  contributed  to  bring  the 
rigid  national  resources  into  a  molten  state,  and  to  shake  off  the  national  in- 
ertia by  the  feeling  of  insecurity,  see  Buquoy,  Theorie  d.  Wirthschaft,  1816, 
347  fl".  Schdffle,  System,  3  aufl.,  254  seq.,  thinks  that  if  Austria  should  first 
adjust  its  values,  and  then,  in  case  of  another  war,  have  recourse  to  a  second 
depreciation,  the  disastrous  disturbances  of  its  national  economy  consequent 
herein  would  be  produced  twice  instead  of  once,  and  not  without  reason. 

I'' The  Prussian  treasury-bills  stood,  in  June,  1809,  at  36  per  cent,  of  their 


Sec.  IV.]  COMPULSORY  CIRCULATION.  455 

Statesmen  are  frequently  deterred  from  seeking  to  eflect  such 
a  restoration.  Yet  the  darkest  side  of  a  paper  currency  sev- 
ered of  due  connection  with  precious  metal-money  consists  in 
the  frequent  and  violent  fluctuations  of  value  to  which  it  is 
subject.^^  The  consequence  of  these  fluctuations  is,  that 
every  commercial  transaction,  every  credit-transaction,  and 
even  every  act  of  saving,  in  which  money  plays  any  part,  is 
made  to  bear  the  impress  of  a  game  of  chance  ;^^  a  conse- 
quence of  far  and  deep  reaching  influence,  especially  in  the 
higher  stages  of  civilization,  where  the  importance  of  com- 
merce, of  the  credit-system,  and  of  money-economy  as  contra- 
distinguished from  barter-economy  is  so  great;  producing 
there  a  state  of  uncertainty  which  is  otherwise  peculiar  only 

nominal  value;  June,  iSio,  84^  per  cent;  January,  1812,  I3J^;  December, 
1812,  44;^;  June,  1813,  26j^;  July,  1813,  24^^;  December  31,  1813,  49K ; 
January',  181 5,  88;  January  5,  1816,  99  per  cent.  Austrian  paper  money  ex- 
pressed in  terms  of  metallic  money,  amounted,  on  an  average,  between  1849 
and  1855,  to  292,000,000,  florins:  but  at  certain  moments,  it  fluctuated  from 
231,000,000  to  337,000,000.  (Tubing.  Zeitschr.,  1856,  124.)  The  agio  of 
silver  fluctuated  during  the  Bancozettel  (bank-billets,  a  species  of  Austrian 
paper  money)  period  from  one  day  to  another  on  'Change  40  and  even  100  per 
cent.:  thus,  on  the  news  of  Napoleon's  entry  into  Paris,  between  the  25th  of 
March  and  the  4th  of  April,  from  330  to  440;  on  the  receipt  of  the  news  of 
the  result  of  the  battle  of  Waterloo,  in  three  days,  from  458  to  412;  after 
Napoleon's  abdication,  from  412  to  320.  (Gentz,  Werke,  V,  62.)  Hnskisson 
rightly  calls  a  depreciated  paper  currency  a  much  worse  thing  than  clipped 
coin :  the  clipping  of  the  coin  is,  so  to  speak,  one  great  blow  after  which 
people  can  again  calculate  with  certainty;  but  bad  paper  money  is  one  con- 
tinual fluctuation. 

""The  only  diflprence  here  is  that  it  is  not  left  to  individuals  to  say 
whether  they  will  join  in  the  game  or  not."     (Hidfcrich.) 

'*  During  the  later  assignat-period  every  house  was  full  of  commodities, 
every  pocket  of  samples;  every  "exquisite  "  and  every  lady  was  a  merchant, 
because  no  one  had  any  further  confidence  in  the  money.  People  had  retro- 
graded to  the  barbarous  condition  of  trade  by  barter.  (Goncourf,  Histoire  de 
la  Socidt^  frangaise  pendant  le  Directoire,  1854.)  The  French  constitution 
of  1795  fixed  the  salaries  of  members  of  the  Directory  at  the  value  of  50,000 
myriogramnies  of  wheat  (art.  173,  68).  In  Delaware,  while  the  depreciation 
of  paper  money  lasted,  farm  rent  was  usually  required  to  be  paid  in  produce. 
(Ebeling,  V,  37.) 


456  PAPER   MONEY.  [App.  I. 

to  barbarous  medieval  times,''''^  All  this  discourages  the  best 
business  men  and  the  best  husbandmen  more  than  it  does 
any  other  class  of  people,  and  demorahzes  the  whole  economy 
of  a  nation;  and  demoralizes  it  the  more  in  proportion  as  it  is 
easier  for  the  state  to  influence  the  value  of  paper  money  as 
compared  with  specie,  and  as  its  influence  is  more  irresistible.^^ 
The  compulsory  circulation  of  paper  money  is  a  much  more 
powerful  and  yet  a  much  more  simple  screw  by  means  of 
which  to  practice  extortion  than  is  the  most  burdensome  tax- 
ation or  forced  loan,  and  at  the  same  time  the  most  compre- 
hensive power  which  a  government  can  possess  to  carry  out 
both  these  measures.     (Ad.   Wagner.) 

All  the  horrors  of  the  later  Roman  republic,  the  draining 
of  the  provinces  by  robber-governors  with  their  publicans 
and  sinners,  the  building  up  of  monstrous  fortunes  without 
any  production  proper,  but  through  usury  and  rapine  alone : 
all  this  is  made  to  revive  again  through  the  instrumentalit}^  of 
the  national-economic  disease  called  a  paper  crisis,  in  a  less 
violent  form,  indeed,  but  in  one  which  is  much  more  insidious 
and  scarcely  less  pernicious. 

''  "  Of  all  contrivances  for  cheating  mankind,  none  has  been  more  effectual 
than  that  which  deludes  them  with  paper  money."  (D.  Webster.)  The 
American  Secretary  of  the  Treasury,  McCttUocJi,  says,  in  the  report  of  De- 
cember 7,  iS6S,  of  the  legal  tender  notes :  "  there  can  be  no  doubt  that  these 
acts  have  tended  to  blunt  and  deaden  the  public  conscience,  and  they  are 
chargeable  in  no  small  degree  with  the  demoralization  which  so  generally 
prevails."  Niebulir  attributes  the  decline  of  old  Spanish  honesty  which 
was  formerly  so  much  relied  on  in  all  gi-eat  money  centers,  principally  to 
the  vales.  ('Nichtphilol.  Nachlass,  4S9.) 

18  This  calls  to  our  mind  the  impersonal  mass-crimes  to  which  our  own 
times  so  frightfully  incline,  when  many  a  man  who  would  recoil  in  horror 
from  an  ordinary  act  of  pocket-picking  or  from  manslaughter  with  intent  to 
commit  larceny,  robs  thousands  in  cold  blood  by  means  of  a  swindling  en- 
terprise, or,  for  the  sake  of  a  fraudulent  insurance,  destroys  the  lives  of  a 
whole  ship's  crew. 


Sec.  V.J  RESUMPTION  OF  SPECIE  PAYMENT.  457 

SECTION  V. 

RESUMPTION  OF  SPECIE  PAYMENTS. 

The  healing  of  such  a  paper-money  disease  as  we  have  de- 
scribed, it  has  been  endeavored  to  effect  in  three  ways  more 
particularly. 

A.  By  the  reduction  or  bringing  back  of  the  depreciated 
paper  money  to  its  full  nominal  value.  And  this  is  best  done 
by  gradually  drawing  paper  money  into  the  state  treasury  by 
means  of  taxation  or  by  loans,  and  refusing  to  allow  such  pa- 
per money  to  be  again  issued.  The  consequent  rise  in  the 
rate  at  which  the  outstanding  paper  money  notes  exchange 
against  specie  is  produced  not  only  by  the  diminution  of  the 
quantity  of  paper  in  circulation,  but  also  by  the  increasing 
confidence  in  the  future  which  such  a  governmental  measure 
inspires.^  While  this  mode  of  procedure  has  in  the  abstract 
most  in  its  favor,  3^  et  it  is  not  to  be  recommended  in  practice 
except  where  the  depreciation  of  paper  money  has  either  not 
gone  very  far  or  where  it  has  existed  only  a  short  time.^ 

'  Saxon  loans  of  two  million  thalers  treasury  notes  (Kassetibilleis),  August, 
1S13,  which  were  then  to  bear  interest  in  silver  and  to  be  paid  in  silver.  The 
purchase  of  the  precious  metals,  or  loans  made  by  the  state  in  foreigrr  coun- 
tries, with  the  intention  of  redeeming  paper  money,  eftect  the  same  end  at  a 
much  greater  cost.  (Peschel,  D.  Vierteljahrsschrift,  185S,  III,  254.)  If  the 
currency  consists  of  bank  notes  endowed  by  the  state  with  compulsory  cir- 
culation and  an  irredeemable  character,  such  a  metallic  loan  made  in  order 
to  reimburse  the  bank  for  a  loan  to  the  state  in  depreciated  notes  is  a  gift 
made  to  the  bank  without  reason;  and  the  metallic  money  brought  into  the 
country  flows  back  into  foreign  parts  when  the  bank  restriction  is  removed, 
because  it,  together  with  the  appreciated  notes,  creates  a  too  abundant  circu- 
lation. 

-  Although  in  England  the  suspension  of  the  redemption  of  notes  had 
lasted  from  1797  to  1S19,  depreciation  of  notes  during  the  greater  part  of  fhis 
time  either  did  not  occur  at  all  (Summer  of  1797  to  1799, 1S02  If.)  or  was  very 
small ;  and  even  during  the  last  five  war  years,  it  did  not  amount  to  much 
over  30  per  cent.  About  1817,  the  notes  of  themselves  again  rose  to  par, 
and  had  lost  but  little  during  the  following  years,  in  consequence  of  the  "reat 
loans  of  the  continental  powers  in  the  English  market.    Under  suchcircum- 


458  PAPER  MONEY.  [App.  I. 

Otherwise  the  revolution  in  all  property-relations  and  the  dis- 
turbance of  all  rightful  speculation  —  always  dangerous  and 
easily  abused  ^- produced  by  the  depreciation  would  be  re- 
peated by  the  restoration  of  values,  with  this  difference  only 
that  the  disturbance  would  be  produced  the  second  time  in  an 
opposite  direction.  And  that  those  who  were  previously  in- 
jured should  now  be  compensated  for  the  damage  sustained  in 
the  first  instance  is  impossible  in  proportion  as  the  depreciation 
has  been  of  longer  duration.  Many  of  the  sufferers  from  the 
effects  of  depreciation  are  now  compelled,  even  as  tax-payers, 
to  contribute  to  the  enrichment  of  the  speculators  who  have 
accumulated  the  depreciated  paper  into  their  own  hands. 

B.  The  extreme  opposite  of  such  a  course  would  consist  in 
this,  that  the  depreciated  paper  should  be  allowed  to  go  on 
sinking  lower  and  lower  until  it  was  practically  worthless, 
whereupon  a  new  currency,  whether  of  metal  or  paper, 
would  have  to  appear  like  a  new  world  after  the  waters  of  a 
deluge  had  been  abated.  Hence,  therefore,  one  of  two  things: 
universal  bankruptcy  entered  into  with  the  clearest  purpose, 
or  the  resignation  of  despair!^ 

stances,  the  repeated  promise  of  the  state  to  make  the  notes  redeemable  at 
their  full  nominal  value  was  certainly  a  cogent  reason  for  the  Peel's  Act  of 
1819.  'In  favor  hereof  are  especially  Tooke,  Hist,  of  Prices,  II,  p.  60  ff.,  and 
y.  S.  Mill,  Principles,  III,  ch.  13.  Opposed  to  it,  the  so-called  Birmingham- 
Atw^ood  school  and  also  Lord  Ashburton,  in  his  statement  before  the  Agri- 
cultural Committee,  1836.  But  according  to  Rob.  MuscJiet,  Tables,  exhibit- 
ing the  Gain  and  Loss  to  the  Bondholders  arising  from  the  Fluctuations  in 
the  Value  of  the  Currency  (1826),  the  state  creditors,  on  the  whole,  lost  more 
by  the  depreciation  of  the  notes  than  they  gained  by  their  subsequent  rise. 
Ad.  Wag-ner  also  is  decidedly  in  favor  of  the  course  A. 

2  This  has  occurred  not  unfrequently  in  the  case  of  the  paper  money  of 
subdued  revolt:  thus,  for  instance,  the  Hungarian  of  1849;  in  the  case  of  the 
Southern  Confederacy.  But  the  assignats,  too,  came  to  this  end,  although, 
according  to  BiiscJi  (Werke  IX,  526),  the  intentions  of  the  country  at  first 
were  good;  and  in  Austria,  in  1810,  many  prophecies  looking  in  this  direc- 
tion were  made.  (Per  contra  Rehberg,  Sammtl.  Schriften.  IV,  334.)  Not 
very  differently  did  it  fare  with  the  Swedish  coin-tokens  (Munzzcichen)  of 
Charles  XII,  which  were  altered  7  times  between  1715  and  1718;  and  where 
besides,  the  tokens  called  in  in  a  much  too  short  space  of  time  were  transformed 


Sec.  v.]  resumption  OF  SPECIE  PAYMENT.  459 

C.  The  middle  course  between  these  two  has,  therefore,  been 
most  frequently  pursued,  viz. :  the  legal  rediictlen  of  the  value  of 
the  coin  (gesctzliche  Devalvirung)^  which  consists  in  reducing 
the  nominal  value  of  paper  money  to  its  current  value  at  the 
moment  the  law  goes  into  force,  and  by  redeeming  it  either  in 
specie  or  in  other  paper  to  be  issued  in  smaller  quantities/  x\l- 
though  this  has  been  not  seldom  based  on  the  false  principle 
that  the  value  of  every  separate  amount  of  money  is  inversely 
as  the  aggregate  amount  of  all  the  money  in  circulation ;  yet 
it  cannot  be  questioned  that  it  is  only  the  open  declaration  of 
the  state  bankruptcy  which  the  whole  measure  involves,  and 
which  in  most  instances  has  already  happened  beyond  repair. 
Here  there  is  no  new  and  dangerous  disturbance  of  the  na- 
tion's economy  whatever;  and  the  fluctuations  of  value  in  the 

into  small  change  coins  -j'j  their  value  hitherto.     (Bruckner  in  HildchramVs 
Jahrb.  1864,  I,  161,  ff.) 

■^Thu^  it  was,  for  instance,  in  Austria,  in  iSii  and  1820,  at  \  and  |  of  the 
rtominal  value,  in  1799  in  the  United  States,  in  1813  in  Denmark  with  the 
currency  notes  (Courantzettel)^  in  1816  in  Norway  with  the  royal  bank  dol- 
lar notes,  in  Sweden  in  1S14  with  the  bank  notes  (Bancozeticlu)  at  llYz  per 
cent.,  in  1839  in  Russia  Avith  the  bankassignationetiy  at  f  of  their  nominal 
value.  Of  th-eoretical  writers  this  course  is  recommended  among  others  by 
Jacob,  Staatsfinanzwissenschaft,  §  980  fF.;  Nebetiius,  CEff.  Credit,  2  Aufl., 
ff. ;  Deutsche  Vierteljahrsschrift,  1841,  I,  65;  Ran,  Lehrbuch,  III,  §  528; 
HelferkJi,  Tiib.  Ztschr.,  1856,  435  ff.  According  to  v.  Rotteck,  Lehrbuch,  IV, 
402,  it  may  be  assumed  that  paper  money  is  spread  among  the  people  of  a 
country  in  proportion  to  their  resources :  which  is  also  the  hypothesis  on 
which  all  direct  taxation  is  based.  Hence  the  gradual  depreciation  of  paper 
money  operates  like  the  imposition  of  a  tax  and  the  reduction  of  value  (Dc- 
ralvirung)  is,  so  to  speak,  only  the  release  of  the  same.  Besides  Getitz 
(Werke  by  Schlezier,  IV,  58)  shows  from  the  example  of  Austria  in  181 1, 
that  in  the  case  of  the  taking  up  of  a  depreciated  paper  currency  it  makes  a 
better  impression  to  give  100  florins  in  specie  for  1,000  florins  in  paper,  than 
200  florins  in  a  new  kind  of  paper.  The  holders  of  the  old  paper  money  have 
now  lost  confidence  in  all  paper  currency.  Of  similar  import  is  the  imme- 
diate abolition  of  the  compulsary  circulation  of  paper  money  at  its  nominal 
value  (Piince  Smith  in  Faucher^s  Vierteljahrsschrift,  VII,  126  ff.),  and  the  in- 
troduction of  compulsory  circulation  in  accordance  with  the  day's  quotations 
of  the  actual  value  of  the  paper  as  compared  with  specie.  (Strachc,  Die 
Valuta  in  CEsterreich,  1861;  fer  contra,  Ad.  Wagner,  Tiib.  Zeitschr.,  1S61, 
606  ff.) 


460  PAPER  MONEY.  [App.  I. 

future  which  are  inseparable  from  the  gradual  contraction  of 
the  volume  of  paper,  continued  until  it  has  reached  its  nomi- 
nal value,  are  avoided:  this  last,  of  course,  only  on  the  sup- 
position that  either  the  pure  metallic  or  the  redeemable  paper 
currency  is  rigidly  adhered  to.^  But  the  problem,  how  to  pro- 
tect both  parties"  to  contracts  entered  into  at  a  rate  of  the  cur- 
rency different  from  that  under  which  they  are  to  be  performed, 
from  all  damage,  is  one  which  will  never  be  perfectly  solved. 
Hence,  of  the  different  measures  to  economically  preserve  a 
state  in  cases  of  extraordinary  need,  the  emission  of  paper 
money  with  compulsory  circulation  is  much  more  universally 
disastrous  to  the  people  than  the  effecting  of  loans  at  the  very 
highest  rate  of  interest,  and  even  than  being  in  arrears  in  the 
matter  of  paying  the  officials  and  creditors  of  the  state.* 

5  Such  measures  as  were  adopted  in  Austria,  in  iSii,  where  a  "redemption 
and  extinction  deputation,"  independent  of  the  government  was  established 
and  sworn  to  prevent  a  furtlier  increase  of  paper  money,  are  not  sufficient 
of  themselves  alone. 

*  The  Code  Civil  (art.  1S95)  makes  the  nominal  value  entirely  conclusive; 
so,  also,  the  Prussian  Landrecht  (I,  §  790):  which  is  to  proclaim  the  omnipo- 
tence and  infallibility  of  the  state  power  in  the  most  ingenuous  or  else  in 
the  most  brutal  manner.  The  power  given  by  PucJita  to  metallic  value  (Pan- 
decten,  VII,  aufl.,  §  38)  is  applicable  neither  to  paper  money  nor  to  small 
coin;  and  it  ignores  entirely  that  stamped  coins  and  currency  money  are 
something  different  from  mere  metallic  commodities  and  even  from  metallic 
bars.  The  Austrian  civil  law  (biirgerliche  Gesetzbuck)  decides  in  favor  of  the 
current  value  (986  seq.):  a  view  which  most  inodern  jurists  since  Savigny 
(Obligationenrecht,  I,  404;  earlier  yet,  Hiifeland^  Ueber  die  rechtliche  Natur 
des  Geldschulden,  180)  entertain.  But  they  even  fail  to  recognize  that  the 
depreciation,  for  instance,  of  paper  money  as  compared  with  specie  and  gen- 
eral decrease  of  purchasing  power  are  identical  only  in  the  case  of  such 
paper  money  or  reduced  coins  which  have  no  compulsory  circulation.  (A. 
Wagner,  Tub.  Ztschr.,  1863,  47S  ff.) 

'  Let  us  suppose  that  at  the  moment  the  state  could  perform  its  duty  to 
its  servants  only  to  the  extent  of  one  half  If  it  should  frankly  admit  this, 
pay  one-half  in  good  money  and  remain  in  debt  for  the  other  half,  it  might 
subsequently,  in  better  times,  make  good  to  them  or  to  their  heirs  what  it 
had  now  refused ;  and  thus  private  credit,  from  the  disturbance  of  which  the 
state  can  only  suifer,  suffer  no  diminution.  Both  are  quite  different  when 
the  state  disguises  its  insolvency  under  the  mask  of  apparent  full  payment 
in  paper  inoney  which  has  lost  50  per  cent,  of  its  nominal  value.     In  oppo- 


Sec.  VI.]  A  CURSE  OR  A  BLESSING.  4G1 

SECTION   VI. 

PAPER  MONEY  — A  CURSE  OR  A  BLESSING  .!> 

Considering  the    double-edged-sword    character    of    this 
mighty  instrument,^  and  the  frightful  consequences  which  its 

sition    to  the   myth  that  the  absignats   saved  France,  see  Levasseiir,  in  the 
Acad,  des  Sc.  m.  et.  p. 

'  It  not  unfrequently  happens  that  a  nation's  paper  money  has  been  directly 
or  indirectly  affected  by  an  unfriendly  state.  Tlius  for  instance,  England,  in 
1794,  tolerated  an  assignat  manufactory  at  Lambeth,  •while  Frenchmen  imi- 
tated English  bank  notes.  (Archenkolz,  Aenalen  XI,  429.)  Napoleon  in  iSi3 
issued  forged  Russian  bank  notes.  (Cancrin,  CEconomie  der  menschl.  Ge- 
sellschaft,  136.  Niebuhr,  Gesch.  der  Revolution,  II,  314.)  When  Maria 
Theresa  first  Avished  to  introduce  paper  money,  Bolza,  her  minister  of  fi- 
nance, in  his  urgent  appeal  to  her  to  desist  from  adopting  such  a  measure, 
foretold  the  subsequent  bankruptcy  etc.  (Mailath,  Oesterr.  Gesch.,  V.,  83.) 
Adam  Smith  compares  gold  and  silver  circulation  to  a  highway  which,  in- 
deed, produces  nothing  directly.  Paper  money  is  an  advance  similar  to  that 
which  Avould  be  produced  by  the  consti'uction  of  a  machine  adapted  to  the 
carriage  of  persons  and  goods  through  the  air,  and  which  permit  the  high- 
ways hitherto  used  to  be  turned  into  meadows,  arable  land  etc.  Ad.  Smith 
very  strongly  emphasizes  the  insecurity  of  these  "  Daidalian  wings  "  as  com- 
pared with  the  "  solid  ground  of  gold  and  silver,"  especially  in  the  transitory 
misfortune  produced  by  war.  (W.  of  N.,  II,  p.  78,  Bas.)  David  Hume  says 
of  ail  paper  media  of  exchange,  that  thev  share  all  the  harmfulness  of  an  in- 
crease of  specie  money,  enhancement  of  the  price  of  commodities,  aggrava- 
tion of  the  obstacles  to  exportation;  but  that  they  do  not  share  in  the  useful 
properties  of  specie  money.  (Discourses,  On  Money  and  on  the  Balance  of 
Trade.)  The  younger  Mirabeau  kept  Necker  from  pursuing  his  plan  to  issue 
paper  money  with  the  words :  die  ;papier  monnaie  c'est  la  feste  circidante!  In- 
consistent as  Napoleon  was  in  his  bank  policy  (compare  Horn,  Bankfreiheit, 
304),  he  always  rejected  paper  money.  As  in  1S05  he  wrote  to  the  minister 
of  justice:  je  ne  veut  ^as  de  papier  monnaie :  so,  in  opposition  to  the  minister 
of  the  interior,  he  in  1810  compared  it  to  the  plague:  le  plus  grandjliau  des 
nations.  (Acad,  des  Sciences  m.  et  p.,  1864,  II,  212.)  Sismondi,  too,  compares 
paper  money  to  the  paper  cannons  of  the  Chinese,  which  render  a  cheap 
service  until  the  hour  of  danger  comes.  (N.  Principles,  II,  107.)  Of  the 
banks  he  says:  les  avantages  aussi-legers  les  dangers  aussi  graves.  (Eludes, 
II,  421).  Cancrin,  CEkonomie  der  menschl.  Gesellschaft,  1845,  152  ff.,  says 
he  thinks  that  possibly  it  might  have  been  well  never  to  have  established 
banks,  but  that  yet  the  craving  for  the  new  is  preponderately  {^pod,  it  brings 


462  PAPER  MONEY.  [App.  I. 

abuse  produces,  it  is  easy  to  conceive  why  so  many  political 
economists  have  expressed  such  serious  doubts  as  to  whether, 
on  the  whole,  the  invention  of  paper  money  has  been  more  of 
a  curse  or  of  a  blessing  to  mankind.  The  controversy  is 
an  idle  one  to  a  certain  extent,  since  no  mature  nation  (or  in- 
dividual), and  no  nation  which  considers  itself  mature  will  re- 
nounce the  possibility  of  a  brilliant  growth  simply  because  it 
fears  that  it  may  not  be  able  to  withstand  the  temptations  to  dan- 
gerous abuse  connected  therewith.  Politically,  the  best  safe- 
guard against  such  temptation  is  a  so-called  moderate  consti- 
tution, which  compels  the  supreme  power  in  the  state  by 
wise  and  appropriate  counterweights,  to  allow  all  rightful  in- 
terests to  assert  themselves,  or  at  least  to  find  expression; 
and  itself  to  make  use  not  only  of  the  most  skillful  but  also  of 
the  most  highly  esteemed  instruments  and  measures.  Such 
a  constitution,  indeed,  cannot  be  made;  it  must  be  the  ripe 
fruit  of  a  long  continued  and  well  conducted  national  life.^ 
Of  the  extremes  of  forms  of  government,  unlimited  monarchy 
and  democrac}^  are  about  equally  exposed  to  the  paper-money 
disease.^  Aristocracies  are  less  exposed  to  it,  for  the  reason 
that  from  their  very  nature  they  eschew  centralization ;  and  the 

inventions  and  improvements  with  it.  Even  Toohe  considers  the  insecurity 
of  paper  money  a  disadvantage  which  more  than  counterbalances  its  cheap- 
ness. (Considerations  on  the  State  of  the  Currency,  1S29,  85.)  On  the 
doubts  of  Jefferson  and  Gallatin^  see  IVolozvski,  Enqu^te,  170,  seq.  Webster 
called  paper  money  "  the  most  effectual  of  inventions  to  fertilize  the  rich 
man's  field  by  the  sweat  of  the  poor  man's  brow."  Tout  papier  monnaie  par 
lilt  meine  est  tin  r7iensonage.  (M.  Chevalier,  Cours,  III,  428.)  M.  Niebuhr  calls 
banks  a  poison  which  should  be  used  with  moderation.  (Bankrevolution 
und  Bankreform,  1846,  37.)     Compare  the  writers  named  in  §  2. 

^  Avec  la  liberie  un  peuple  rCa  jamais  de  mauvaiscs  monnaies  (F.  Lenormajit)  : 
entirely  so,  provided  libertd  be  translated  "  true  and  insured  freedom." 

2  Law's  giddy  projects  under  the  regents  of  Orleans  and  the  assignats  of 
the  first  republic ;  Austria,  Russia  and  the  United  States;  the  Danish  abso- 
lute monarchy,  and  Sweden,  both  under  Charles  XII.,  and  its  oligarchical 
times.  The  history  of  Rhode  Island  paper  money  is  peculiarly  scandalous. 
All  debts  had  to  be  paid  within  two  years,  or  to  be  held  invalid,  and  juries 
were  dispensed  with  in  such  cases.  (Ebeling,  Gesch.  und  Erdbeschreib.  von 
N.  America,  II,  173  ff.) 


Sec.  VI.]  A  CURSE  OR  A  BLESSING.  4G3 

paper-money  system  is  intimately  connected  with  tlie  latter. 
Nothing  so  strengthens  the  central  authority  as  the  paper- 
prerogative  with  an  unlimited  power  over  the  prices  of  all  com- 
modities; and,  on  the  other  hand,  whenever  paper  money  is 
to  have  a  wide  field  for  action,  there  is  supposed  *  a  far-reach- 
ing and  intimate  interwearing  of  the  ditlerent  members  of  the 
nation's  economy  with  one  another.  And  in  w^iat  concerns 
the  various  economic  stages,  paper  money  is  far  removed  from 
all  medieval  times;  and  for  the  same  reasons  that  make  external 
commerce  here  preponderant  and  condense  all  commerce  into 
caravans,  staple-towns,  fairs,  and  recommend  the  collection  of 
treasure  etc.^  Later,  on  the  other  hand,  we  find  two  stages 
especially  adapted  to  paper  money.  We  have  first,  as  yet  un- 
developed but  intellectually  active  (and  therefore  desirous  of 
progress)  colonial  countries,  possessed  in  abundance  of  natural 
means  of  production  without  however  being  able  to  concen- 
trate them  into  the  hands  of  an  undertaker  (  Unternehmer)  for 

^ Ad.  Mailer  compares  "cosmopolitan"  metallic  money  to  a  universal  lan- 
guage :  paper  money  ties  one  to  the  country,  as  people  do  not  like  to  travel 
in  foreign  parts  when  they  understand  only  their  native  language.  As  paper 
money  compels  subjects  to  take  an  interest  in  the  state,  a  state  like  Austria 
would  act  very  foolishly  if  it  should  begin  its  reorganization  by  enhancing 
its  depreciated  values  (Valuta).  (Elemente  der  Staatskunst,  i8o,  III,  171; 
II,  339  ff.)  Even  in  1S30,  he  found  fault  with  the  Austrian  loan  for  the  pay- 
ment of  the  paper  money.  (Briefwechsel  mit  Gentz,  321  seq.)  He  lauded 
paper  money  because  he  claimed  it  led  a  country  back  to  the  barter  and 
service-economy  of  the  middle  ages.  (Verm.  Schriften,  I,  59  ff.)  Similarly, 
Gentz.,  in  his  later  writings.  Compare  Rosclier,  Gesch.,  der  N.  CEk.,  in 
Deutschland,  II,  762. 

6  Who,  for  instance,  would  lay  by  a  paper  dollar  in  the  savings  bank  for 
his  godchild.'  In  this  respect,  too,  oriental  countries  have  preserved  much 
of  the  medieval.  Concerning  the  aversion  of  the  Egyptians  of  our  day  for 
all  paper  money,  see  Stephan.,  ^gypten,  250  seq.  This  is  all  the  more  sur- 
prising since  during  several  months  after  the  harvest,  there  are  from  4,000,000 
to  8,000,000  piasters  in  specie  sent  every  day  from  Alexandria  by  post  to 
private  individuals  in  the  provinces.  In  addition  to  this  there  is  the  immense 
dilYerence  in  the  French,  English  and  Austrian  coins  circulating  in  the  coun- 
try, and  which  have  very  different  rates  in  the  different  provinces.  It  is  still 
worse  in  Arabia,     (v.  Maltzan,  Reise,  I,  27.) 


464  PAPER  MONEY,  [Arp.  I. 

want  of.  money.®  Here  both  the  saving  of  the  precious  metals 
and  the  facilitation  of  transportation  effected  by  means  of 
paper  money  are  of  greatest  utility.  And  then  we  have  very 
highly  developed  and  rich  countries;  not  only  because  their 
economic  popular  education  may  protect  them  against  the 
dangers  of  paper  money,  but  because  the  rich  man  has  relat- 
ively least  need  of  money  and  may  dispense  with  stores  of 
specie  most  readily,  because  of  his  influence  over  the  supply 
of  others.'^ 

^  Compare  v.  ScMozer,  Anfangsgriinde,  I,  140  ff.  M.  Niebuhr  (Rau's  Ar- 
chiv.  N.  F.,  II,  125)  finds  paper  money  best  adapted  to  countries  without 
any  exchange-trade,  but  which  at  the  same  time  require  a  species  of  money 
easily  computed  and  easy  of  transportation  (Russia);  countries  whose  na- 
tional economy  has  an  extraordinarily  rapid  growth  (the  United  States) ;  and 
in  unusually  solid  countries  (Scotland). 

"^List,  Nat.  System  der  politischen  ffik.,  I,  394.  A  private  individual  of 
small  means  who  should  go  on  his  travels  without  money  would  be  subject 
to  all  sorts  of  annoyances;  a  king  or  a  Rothschild,  just  as  soon  as  he  was 
recognized  as  such,  would  find  credit  everywhere.  Thus,  English  business- 
men have  outstanding  claims  in  all  parts  of  the  world,  which  might  with- 
out any  great  difficulty  be  called  in  in  the  precious  metals.  The  more  the 
division  of  labor  is  developed,  the  better  may  the  condition  of  a  nation's 
whole  economy  be  seen  reflected  in  the  course  of  its  banking  system  and  its 
exportation  and  importation. 


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